Title: Comparing robustness of realised measures under round-off errors, price adjustments and serial correlations: a simulation study

Authors: Hiroumi Misaki

Addresses: Faculty of Engineering, Information and Systems, University of Tsukuba, Tennodai 1-1-1, Tsukuba City, Ibaraki 305-8577, Japan

Abstract: We compare the accuracy of realised measures using a number of computer simulations. Realised measures are the methods used to estimate the integrated volatility from high-frequency data. We consider a simple realised volatility (RV), a five-minute RV, a subsampled five-minute RV, a two-scale (TS) estimator, a realised kernel (RK), a pre-averaging (PA) estimator and a separating information maximum likelihood (SIML) estimator. We use seven market microstructure models, which includes round-off errors, price adjustments and serial correlation. The SIML is not irrationally biased in any case; this implies that the SIML is sufficiently robust to the market microstructure noise in any form. We have also found that the SIML is the only realised measure for maintaining consistency in all our simulations. We conclude that SIML is suitable for practical applications.

Keywords: finance; high frequency data; decision making; realised measures; volatility estimation; robustness; market microstructure noise; round-off; price adjustments; serial correlations; simulation study; high performance computing; separating information maximum likelihood; SIML.

DOI: 10.1504/IJCSYSE.2020.109122

International Journal of Computational Systems Engineering, 2020 Vol.6 No.1, pp.1 - 13

Received: 18 Jul 2019
Accepted: 07 Aug 2019

Published online: 13 Aug 2020 *

Full-text access for editors Access for subscribers Purchase this article Comment on this article