ON THE ROBUSTNESS OF RANGE-BASED VOLATILITY ESTIMATORS
<heading id="h1" level="1" implicit="yes" format="display">Abstract</heading>We empirically examine Parkinson's range-based volatility estimate in the federal funds market, which is unique because institutional regulations create a predictable pattern in interday volatility. We find that range-based volatility estimates and standard deviations produce the expected volatility pattern. We also find that at trading pressure points where microstructure noise should be greatest, range-based estimates are less than the standard deviations. Thus, we support the argument that range-based volatility estimates remove the upward bias created by microstructure noise. We find that the Parkinson method is the most efficient range-based volatility measure among a set of alternates in this market. Copyright (c) 2010 The Southern Finance Association and the Southwestern Finance Association.
Year of publication: |
2010
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Authors: | Ozgur (Ozzy) Akay ; Griffiths, Mark D. ; Winters, Drew B. |
Published in: |
Journal of Financial Research. - Southern Finance Association - SFA, ISSN 0270-2592. - Vol. 33.2010, 2, p. 179-199
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Publisher: |
Southern Finance Association - SFA Southwestern Finance Association - SWFA |
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