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Cambridge Finance Workshop - Yacine Ait-Sahalia

Cambridge Finance Workshop Series are usually held on Thursdays during term time. The workshops are an opportunity for those working in finance to present their latest results or papers.
When May 12, 2016
from 01:00 PM to 02:00 PM
Where Room W4.03, Cambridge Judge Business School
Contact Name
Contact Phone 01223768129
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Yacine Ait-Sahalia
Otto A. Hack 1903 Professor of Finance and Economics

Princeton University

A Hausman Test for the Presence of Market Microstructure Noise in High Frequency Data

We develop tests that help assess whether a high frequency data sample can be treated as reasonably free of market microstructure noise at a given sampling frequency for the purpose of implementing high frequency volatility and other estimators. The tests are based on the Hausman principle of comparing two estimators, one that is efficient but not robust to the deviation being tested, and one that is robust but not as efficient. We investigate the asymptotic properties of the test statistic in a general nonparametric setting, and compare it with several alternatives that are also developed in the paper. Empirically, we find that improvements in stock market liquidity over the past decade have increased the frequency at which simple, uncorrected, volatility estimators can be safely employed.

 

 

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