Template-type: ReDIF-Paper 1.0
Author-Name: Ole E. Barndorff-Nielsen
Author-Email: oebn@imf.au.dk
Author-Workplace-Name: University of Aarhus
Author-Workplace-Homepage: 
Author-Name: Peter Reinhard Hansen
Author-Email: peter.hansen@stanford.edu
Author-Workplace-Name: Stanford University
Author-Workplace-Homepage: 
Author-Name: Asger Lunde
Author-Email: ALunde@asb.dk 
Author-Workplace-Name: Aarhus School of Business
Author-Name: Neil Shephard
Author-Email: neil.shephard@nuffield.ox.ac.uk
Author-Workplace-Name:  Nuffield College, University of Oxford
Author-Workplace-Homepage: http://www.nuff.ox.ac.uk/users/shephard/
Title: Designing realised kernels to measure the ex-post variation of equity prices
in the presence of noise
Abstract: This paper shows how to use realised kernels to carry out efficient feasible
inference on the ex-post variation of underlying equity prices in the presence of
simple models of market frictions. The issue is subtle with only estimators which
have symmetric weights delivering consistent estimators with mixed Gaussian limit
theorems. The weights can be chosen to achieve the best possible rate of convergence and
to have an asymptotic variance which is close to that of the maximum likelihood estimator
in the parametric version of this problem. Realised kernels can also be selected to (i) be
analysed using endogenously spaced data such as that in databases on transactions, (ii) allow
for market frictions which are endogenous, (iii) allow for temporally dependent noise. The
finite sample performance of our estimators is studied using simulation, while empirical
work illustrates their use in practice.
Classification-JEL: C13, C22
X-Keywords: 
Length: 42 pages
Creation-Date: 2006-05-31
Number: 2006-W03
File-URL: http://www.nuffield.ox.ac.uk/economics/papers/2006/w3/realised.pdf
File-Format: application/pdf
Handle: RePEc:nuf:econwp:0603