Estimation of high-frequency volatility: An autoregressive conditional duration approach

We propose a method to estimate the intraday volatility of a stock by integrating the instantaneous conditional return variance per unit time obtained from the autoregressive conditional duration (ACD) model, called the ACD-ICV method. We compare the daily volatility estimated using the ACD-ICV meth...

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Bibliographic Details
Main Authors: TSE, Yiu Kuen, YANG, Thomas Tao
Format: text
Language:English
Published: Institutional Knowledge at Singapore Management University 2012
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Online Access:https://ink.library.smu.edu.sg/soe_research/1410
https://ink.library.smu.edu.sg/context/soe_research/article/2409/viewcontent/Estimation_of_High_Frequency_Volatility_2012.pdf
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Institution: Singapore Management University
Language: English
Description
Summary:We propose a method to estimate the intraday volatility of a stock by integrating the instantaneous conditional return variance per unit time obtained from the autoregressive conditional duration (ACD) model, called the ACD-ICV method. We compare the daily volatility estimated using the ACD-ICV method against several versions of the realized volatility (RV) method, including the bipower variation RV with subsampling, the realized kernel estimate, and the duration-based RV. Our Monte Carlo results show that the ACD-ICV method has lower root mean-squared error than the RV methods in almost all cases considered. This article has online supplementary material.