Robustness of Fourier estimator of integrated volatility in the presence of microstructure noise

The finite sample properties of the Fourier estimator of integrated volatility under market microstructure noise are studied. Analytic expressions for the bias and the mean squared error of the contaminated estimator are derived. These formulae can be practically used to design optimal MSE-based estimators, which are very robust and efficient in the presence of noise. Moreover an empirical analysis based on a simulation study and on high-frequency logarithmic prices of the Italian stock index futures (FIB30) validates the theoretical results. Key words: integrated volatility, nonparametric estimation, Fourier analysis, microstructure, optimal sampling

• Type: Journal
• Year: 2008
• Where: CSDA
• Authors: M. E. Mancino, S. Sanfelici
• Keywords: CSDA 2008, Estimators, Finite Sample Properties, Market Microstructure Noise