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http://dx.doi.org/10.5351/CSAM.2016.23.5.411

Asymptotics for realized covariance under market microstructure noise and sampling frequency determination  

Shin, Dong Wan (Department of Statistics, Ewha Womans University)
Hwang, Eunju (Department of Applied Statistics, Gachon University)
Publication Information
Communications for Statistical Applications and Methods / v.23, no.5, 2016 , pp. 411-421 More about this Journal
Abstract
Large frequency limiting distributions of two errors in realized covariance are investigated under noisy and non-synchronous high frequency sampling situations. The first distribution characterizes increased variance of the realized covariance due to noise for large frequency and the second distribution characterizes decreased variance of the realized covariance due to discretization for large frequency. The distribution of the combined error enables us to determine the sampling frequency which depends on a nuisance parameter. A consistent estimator of the nuisance parameter is proposed.
Keywords
market microstructure noise; non-synchronous trading; realized covariance;
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