Efficient covariance estimation for asynchronous noisy high-frequency data

Markus Bibinger

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arXiv · 0812.3536

Efficient covariance estimation for asynchronous noisy high-frequency data

Markus Bibinger

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Abstract

We focus on estimating the integrated covariance of log-price processes in the presence of market microstructure noise. We construct an efficient unbiased estimator for the quadratic covariation of two Itô processes in the case where high-frequency asynchronous discrete returns under market microstructure noise are observed. This estimator is based on synchronization and multi-scale methods and attains the optimal rate of convergence. A Monte Carlo study analyzes the finite sample size characteristics of our estimator.

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Markus Bibinger. 2008-12-18. Efficient covariance estimation for asynchronous noisy high-frequency data. https://arxiv.org/abs/0812.3536

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