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ESTIMATING VOLATILITY FUNCTIONALS WITH MULTIPLE TRANSACTIONS

Published online by Cambridge University Press:  15 February 2016

Bing-Yi Jing ,
Zhi Liu  and
Xin-Bing Kong
Bing-Yi Jing
Affiliation:
Hong Kong University of Science and Technology, Hong Kong
Zhi Liu*
Affiliation:
University of Macau and UMacau Zhuhai Research Institute
Xin-Bing Kong
Affiliation:
Soochow University, China
*
*Address correspondence to Dr. Zhi Liu at liuzhi@umac.mo.
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Abstract

The phenomenon of multiple transactions at each recording time is a common occurrence for high-frequency financial data because of the heavy trading of the market and limitation of the recording mechanism. This situation has existed for many years, but has become more common in recent years because of heavier trading. Surprisingly, there have been few studies on this important issue, in spite of some ad hoc approaches to treat multiple transactions. In this paper we investigate how to handle multiple transactions, particularly in the context of estimating the integrated volatility and integrated quarticity, which are of great interest in financial econometrics. Two approaches are proposed for this purpose, and their asymptotic properties are investigated. Their performances are confirmed by simulation studies. The estimators are also applied to some real world problems. The work represents only the first step in this direction, and some future research problems are discussed.

Type
ARTICLES
Information
Econometric Theory , Volume 33 , Issue 2 , April 2017 , pp. 331 - 365
Copyright
Copyright © Cambridge University Press 2016 

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