Limit theorem of realized covariance with the presence of price staleness
Prof. Zhi LIU
Associate Professor in Mathematics,
FST, UM
Date: 27 February (Tuesday)
Time: 1:00pm to 2:00pm
Venue: FBA Lobby
Abstract
Considering the presence of systematic price staleness, we study the problem of estimating the integrated covariation of two semi-martingales. We propose a consistent estimator of the integrated covariation and establish a unified limiting theory, which includes several existing results as special cases. Our results demonstrate that the idiosyncratic price staleness appears in the limit of the standard realized covariation, but the systematic price staleness only appears in the asymptotic variance. Moreover, we find that price staleness makes the standard realized covariation closer to zero than that without price staleness. Hence it explains the Epps effect. We also derive a consistent estimator under the presence of microstructure noise. We conduct extensive Monte Carlo studies to assess the finite sample performance of the proposed theory, and some empirical applications to real high-frequency data are considered to illustrate our theory.
All are welcome!
