Separating microstructure noise from volatility

• 成果类型: Article
• 署名作者: Bandi, FM; Russell, JR
• 署名单位: University of Chicago
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2005.01.005
• 发表日期: 2006
• 页码: 655-692
• 关键词: volatility; Volatility timing; microstructure noise; High frequency data

摘要

There are two variance components embedded in the returns constructed using high frequency asset prices: the time-varying variance of the unobservable efficient returns that would prevail in a frictionless economy and the variance of the equally unobservable microstructure noise. Using sample moments of high frequency return data recorded at different frequencies, we provide a simple and robust technique to identify both variance components. In the context of a volatility-timing trading strategy, we show that careful (optimal) separation of the two volatility components of the observed stock returns yields substantial utility gains. (c) 2004 Elsevier B.V. All rights reserved.