English, Article, Journal or magazine article edition: On the Correlation Structure of Microstructure Noise in Theory and Practice Francis X. Diebold; Georg H. Strasser

User activity

Share to:
 
Bookmark: http://trove.nla.gov.au/version/73442
Physical Description
  • preprint
Language
  • English

Edition details

Title
  • On the Correlation Structure of Microstructure Noise in Theory and Practice
Author
  • Francis X. Diebold
  • Georg H. Strasser
Physical Description
  • preprint
Notes
  • RePEc:pen:papers:08-038
  • We argue for incorporating the financial economics of market microstructure into the financial econometrics of asset return volatility estimation. In particular, we use market microstructure theory to derive the cross-correlation function between latent returns and market microstructure noise, which feature prominently in the recent volatility literature. The cross-correlation at zero displacement is typically negative, and cross-correlations at nonzero displacements are positive and decay geometrically. If market makers are sufficiently risk averse, however, the cross-correlation pattern is inverted. Our results are useful for assessing the validity of the frequently-assumed independence of latent price and microstructure noise, for explaining observed crosscorrelation patterns, for predicting as-yet undiscovered patterns, and for making informed conjectures as to improved volatility estimation methods.
  • Realized volatility, Market microstructure theory, High-frequency data, Financial econometrics
  • RePEc:boc:bocoec:693
Language
  • English
Contributed by
OAIster

Get this edition

  • Set up My libraries

    How do I set up "My libraries"?

    In order to set up a list of libraries that you have access to, you must first login or sign up. Then set up a personal list of libraries from your profile page by clicking on your user name at the top right of any screen.

  • All (1)
  • Unknown (1)
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.
None of your libraries hold this item.

User activity


e.g. test cricket, Perth (WA), "Parkes, Henry"

Separate different tags with a comma. To include a comma in your tag, surround the tag with double quotes.

Be the first to add a tag for this edition

Be the first to add this to a list

Comments and reviews

What are comments? Add a comment

No user comments or reviews for this version

Add a comment