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- Title
Business Time Sampling Scheme with Applications to Testing Semi-Martingale Hypothesis and Estimating Integrated Volatility.
- Authors
Yingjie Dong; Yiu-Kuen Tse
- Abstract
We propose a new method to implement the Business Time Sampling (BTS) scheme for high-frequency financial data. We compute a time-transformation (TT) function using the intraday integrated volatility estimated by a jump-robust method. The BTS transactions are obtained using the inverse of the TT function. Using our sampled BTS transactions, we test the semi-martingale hypothesis of the stock log-price process and estimate the daily realized volatility. Our method improves the normality approximation of the standardized business-time return distribution. Our Monte Carlo results show that the integrated volatility estimates using our proposed sampling strategy provide smaller root mean-squared error.
- Subjects
MARKET volatility; STATISTICAL sampling; MONTE Carlo method; SAMPLING (Process); DATA analysis
- Publication
Econometrics (2225-1146), 2017, Vol 5, Issue 4, p51
- ISSN
2225-1146
- Publication type
Article
- DOI
10.3390/econometrics5040051