New Economics Papers
on Market Microstructure
Issue of 2006‒12‒01
three papers chosen by
Thanos Verousis
  1. Bid-ask spread and liquidity premium in Brazil By Minardi, Andrea Maria Accioly Fonseca; SANVICENTE, Antônio Zoratto; Monteiro, Rogério
  2. Realized volatility: a review By Michael McAleer; Marcelo Cunha Medeiros
  3. Modeling and forecasting the volatility of Brazilian asset returns By MArcelo Carvalho; MArco Aurelio Freire; Marcelo Cunha Medeiros; Leonardo Souza
  1. By: Minardi, Andrea Maria Accioly Fonseca; SANVICENTE, Antônio Zoratto; Monteiro, Rogério
    Date: 2006–10
    URL: http://d.repec.org/n?u=RePEc:ibm:ibmecp:wpe_51&r=mst
  2. By: Michael McAleer (University of Western Australia); Marcelo Cunha Medeiros (Department of Economics PUC-Rio)
    Abstract: This paper reviews the exciting and rapidly expanding literature on realized volatility. After presenting a general univariate framework for estimating realized volatilities, a simple discrete time model is presented in order to motivate the main results. A continuous time specification provides the theoretical foundation for the main results in this literature. Cases with and without microstructure noise are considered, and it is shown how microstructure noise can cause severe problems in terms of consistent estimation of the daily realized volatility. Independent and dependent noise processes are examined. The most important methods for providing consistent estimators are presented, and a critical exposition of different techniques is given. The finite sample properties are discussed in comparison with their asymptotic properties. A multivariate model is presented to discuss estimation of the realized covariances. Various issues relating to modelling and forecasting realized volatilities are considered. The main empirical findings using univariate and multivariate methods are summarized.
    Date: 2006–11
    URL: http://d.repec.org/n?u=RePEc:rio:texdis:531&r=mst
  3. By: MArcelo Carvalho (DEPARTMENT ECONOMIC STATISTICS AND DECISION SUPPORT, STOCKHOLM SCHOOL OF ECONOMICS,); MArco Aurelio Freire (BANK BOSTON); Marcelo Cunha Medeiros (Department of Economics PUC-Rio); Leonardo Souza (ENERGY STATISTICS SECTION UNITED NATIONS)
    Abstract: The goal of this paper is twofold. First, using five of the most actively traded stocks in the Brazilian financial market, this paper shows that the normality assumption commonly used in the risk management area to describe the distributions of returns standardized by volatilities is not compatible with volatilities estimated by EWMA or GARCH models. In sharp contrast, when the information contained in high frequency data is used to construct the realized volatility measures, we attain the normality of the standardized returns, giving promise of improvements in Value-at-Risk statistics. We also describe the distributions of volatilities of the Brazilian stocks, showing that they are nearly lognormal. Second, we estimate a simple model to the log of realized volatilities that differs from the ones in other studies. The main difference is that we do not find evidence of long memory. The estimated model is compared with commonly used alternatives in an out-of-sample forecasting experiment.
    Date: 2006–11
    URL: http://d.repec.org/n?u=RePEc:rio:texdis:530&r=mst
This issue is ©2006 by Thanos Verousis. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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