A1203
Title: Nonparametric range-based estimation of integrated variance with episodic extreme return persistence
Authors: Yifan Li - The University of Manchester (United Kingdom)
Ingmar Nolte - Lancaster University (United Kingdom)
Sandra Nolte - Lancaster University (United Kingdom)
Shifan Yu - Lancaster University (United Kingdom) [presenting]
Abstract: The purpose is to develop a novel nonparametric estimator of integrated variance that utilizes intraday candlestick information comprised of the high, low, open, and close prices within short time intervals. The range-return difference volatility (RRDV) estimator is robust to short-lived extreme return persistence hardly attributable to the diffusion component, such as gradual jumps and flash crashes. By modelling such sharp but continuous price movements following recent theoretical advances, RRDV provides consistent estimates with four times smaller variances than those obtained with the differenced-return volatility (DV) estimator. Monte Carlo simulations and empirical applications further validate the practical reliability of the proposed estimator with some finite-sample refinements.
