DISCUSSION PAPER SERIES ECONOMETRIC ANALYSIS OF MULTIVARIATE REALISED QML : EFFICIENT POSITIVE SEMI-DEFINITE ESTIMATORS OF THE COVARIATION OF EQUITY PRICES

@inproceedings{Shephard2012DISCUSSIONPS,
  title={DISCUSSION PAPER SERIES ECONOMETRIC ANALYSIS OF MULTIVARIATE REALISED QML : EFFICIENT POSITIVE SEMI-DEFINITE ESTIMATORS OF THE COVARIATION OF EQUITY PRICES},
  author={Neil Shephard and Dacheng Xiu},
  year={2012}
}
Estimating the covariance and correlation between assets using high frequency data is challenging due to market microstructure effects and Epps effects. In this paper we extend Xiu’s univariate QML approach to the multivariate case, carrying out inference as if the observations arise from an asynchronously observed vector scaled Brownian model observed with error. Under stochastic volatility the resulting QML estimator is positive semi-definite, uses all available data, is consistent and… CONTINUE READING

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