Department of Statistics Unitmark
Dietrich College of Humanities and Social Sciences

Ultra High Frequency Volatility Estimation with Dependent Microstructure Noise

Publication Date

June, 2005

Publication Type

Tech Report


Yacine Aït-Sahalia, Per A. Mykland, and Lan Zhang


We analyze the impact of time series dependence in market microstructure noise on the properties of estimators of the integrated volatility of an asset price based on data sampled at frequencies high enough for that noise to be a dominant consideration. We show that combining two time scales for that purpose will work even when the noise exhibits time series dependence, analyze in that context a refinement of this approach based on multiple time scales, and compare empirically our different estimators to the standard realized volatility.