We analyze the behaviour of the realized volatility (RV) estimator under liquidity effects. The liquidity is measured by the impact of the trading volume on the asset price. We find that this estimator is inconsistent but convergent in probability. Motivated by this fact, we propose a new estimator which is consistent and asymptotically unbiased under a linear economy. Finally, our results are validated by a simulation and an empirical study.

Realized volatility estimator under liquidity effects / Allaj, Erindi. - (2021).

Realized volatility estimator under liquidity effects

ALLAJ ERINDI
2021

Abstract

We analyze the behaviour of the realized volatility (RV) estimator under liquidity effects. The liquidity is measured by the impact of the trading volume on the asset price. We find that this estimator is inconsistent but convergent in probability. Motivated by this fact, we propose a new estimator which is consistent and asymptotically unbiased under a linear economy. Finally, our results are validated by a simulation and an empirical study.
Realized volatility estimator under liquidity effects / Allaj, Erindi. - (2021).
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Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/11381/2913866
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