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Full-Text Articles in Social and Behavioral Sciences
Weak Convergence To Stochastic Integrals For Econometric Applications, Hanying Liang, Peter C. B. Phillips, Hanchao Wang, Qiying Wang
Weak Convergence To Stochastic Integrals For Econometric Applications, Hanying Liang, Peter C. B. Phillips, Hanchao Wang, Qiying Wang
Research Collection School Of Economics
Limit theory involving stochastic integrals is now widespread in time series econometrics and relies on a few key results on functional weak convergence. In establishing such convergence, the literature commonly uses martingale and semimartingale structures. While these structures have wide relevance, many applications involve a cointegration framework where endogeneity and nonlinearity play major roles and complicate the limit theory. This paper explores weak convergence limit theory to stochastic integral functionals in such settings. We use a novel decomposition of sample covariances of functions of I (1) and I (0) time series that simplifies the asymptotics and our limit results for …
Estimating The Volatility Occupation Time Via Regularized Laplace Inversion, Jia Li, Viktor Todorov, Tauchen
Estimating The Volatility Occupation Time Via Regularized Laplace Inversion, Jia Li, Viktor Todorov, Tauchen
Research Collection School Of Economics
We propose a consistent functional estimator for the occupation time of the spot variance of an asset price observed at discrete times on a finite interval with the mesh of the observation grid shrinking to zero. The asset price is modeled nonparametrically as a continuous-time Itô semimartingale with nonvanishing diffusion coefficient. The estimation procedure contains two steps. In the first step we estimate the Laplace transform of the volatility occupation time and, in the second step, we conduct a regularized Laplace inversion. Monte Carlo evidence suggests that the proposed estimator has good small-sample performance and in particular it is far …
Generalized Method Of Integrated Moments For High-Frequency Data, Jia Li, Dacheng Xiu
Generalized Method Of Integrated Moments For High-Frequency Data, Jia Li, Dacheng Xiu
Research Collection School Of Economics
We propose a semiparametric two‐step inference procedure for a finite‐dimensional parameter based on moment conditions constructed from high‐frequency data. The population moment conditions take the form of temporally integrated functionals of state‐variable processes that include the latent stochastic volatility process of an asset. In the first step, we nonparametrically recover the volatility path from high‐frequency asset returns. The nonparametric volatility estimator is then used to form sample moment functions in the second‐step GMM estimation, which requires the correction of a high‐order nonlinearity bias from the first step. We show that the proposed estimator is consistent and asymptotically mixed Gaussian and …