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BIAS REDUCTION IN NONPARAMETRIC DIFFUSION COEFFICIENT ESTIMATION

Published online by Cambridge University Press:  04 August 2003

João Nicolau
João Nicolau
Affiliation:
Instituto Superior de Economia e Gestão, Universidade Técnica de Lisboa
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Abstract

In this paper, we quantify the asymptotic bias of the Florens-Zmirou (1993, Journal of Applied Probability 30, 790–804) and Jiang and Knight (1997, Econometric Theory 13, 615–645) estimator for the diffusion coefficient when the step of discretization is fixed, and then we propose a bias adjustment that partially compensates for the distortion. Also, we show that our estimators have all the asymptotic properties of the Florens-Zmirou and Jiang and Knight estimator when the step of discretization goes to zero. We provide some examples.I thank the editor Peter C.B. Phillips and the two referees for comments and suggestions that led to considerable improvement of the paper. I am also grateful to Carlos Braumann and Tom Kundert for helpful comments. This research was supported by the Fundação para a Ciência e a Tecnologia (FCT) and by POCTI.

Type
Research Article
Information
Econometric Theory , Volume 19 , Issue 5 , October 2003 , pp. 754 - 777
Copyright
© 2003 Cambridge University Press

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