Edgeworth expansions for realized volatility and related estimators

Lan Zhang, Per A. Mykland, Yacine Ait-Sahalia

Research output: Contribution to journalArticle

25 Scopus citations

Abstract

This paper shows that the asymptotic normal approximation is often insufficiently accurate for volatility estimators based on high frequency data. To remedy this, we derive Edgeworth expansions for such estimators. The expansions are developed in the framework of small-noise asymptotics. The results have application to CornishFisher inversion and help setting intervals more accurately than those relying on normal distribution.

Original languageEnglish (US)
Pages (from-to)190-203
Number of pages14
JournalJournal of Econometrics
Volume160
Issue number1
DOIs
StatePublished - Jan 1 2011

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics

Keywords

  • Bias correction
  • Edgeworth expansion
  • Market microstructure
  • Martingale
  • Realized volatility
  • Two scales realized volatility

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