Template-type: ReDIF-Paper 1.0
Author-Name: Ole E. Barndorff-Nielsen
Author-Email: oebn@imf.au.dk
Author-Workplace-Name: University of Aarhus
Author-Name: Peter Reinhard Hansen
Author-Email: peter.hansen@stanford.edu
Author-Workplace-Name: Stanford University
Author-Name: Asger Lunde
Author-Email: ALunde@asb.dk
Author-Workplace-Name: Aarhus School of Business
Author-Name: Neil Shephard
Author-Email: neil.shephard@economics.ox.ac.uk
Author-Workplace-Name: Nuffield College, University of Oxford
Title: Subsampling realised kernels
Abstract: In a recent paper we have introduced the class of realised kernel 
estimators of the increments of quadratic variation in the presence of noise. 
We showed that this estimator is consistent and derived its limit distribution under various assumptions on the kernel weights. In this paper we extend our
analysis, looking at the class of subsampled realised kernels and we derive
the limit theory for this class of estimators. We find that subsampling is
highly advantageous for estimators based on discontinuous kernels, such as the
truncated kernel. For kinked kernels, such as the Bartlett kernel,
we show that subsampling is impotent, in the sense that subsampling has no
effect on the asymptotic distribution. Perhaps surprisingly, for the
efficient smooth kernels, such as the Parzen kernel, we show that
subsampling is harmful as it increases the asymptotic variance. We also
study the performance of subsampled realised kernels in simulations and in
empirical work.
Keywords: Bipower variation; Long run variance estimator; Market frictions; Quadratic variation; Realised kernel; Realised variance; Subsampling.
Classification-JEL: C13, C22
Length: 41 pages
Creation-Date: 2006-08-20
Number: 2006-W10
File-URL: http://www.nuffield.ox.ac.uk/economics/papers/2006/w10/subsampling6.pdf
File-Format: application/pdf
Handle: RePEc:nuf:econwp:0610