nep-mst New Economics Papers
on Market Microstructure
Issue of 2017‒06‒11
three papers chosen by
Thanos Verousis
University of Newcastle

  1. Bootstrapping Pre-Averaged Realized Volatility under Market Microstructure Noise By Goncalves, Silvia; Hounyo, Ulrich; Meddahi, Nour
  2. Bootstrapping high-frequency jump tests By Dovonon, Prosper; Goncalves, Silvia; Hounyo, Ulrich; Meddahi, Nour
  3. Characteristics, causes, and price effects: Empirical evidence of intraday Edgeworth cycles By Siekmann, Manuel

  1. By: Goncalves, Silvia; Hounyo, Ulrich; Meddahi, Nour
    Abstract: The main contribution of this paper is to propose a bootstrap method for inference on integrated volatility based on the pre-averaging approach, where the pre-averaging is done over all possible overlapping blocks of consecutive observations. The overlapping nature of the pre-averaged returns implies that the leading martingale part in the pre-averaged returns are kn-dependent with kn growing slowly with the sample size n. This motivates the application of a blockwise bootstrap method. We show that the \blocks of blocks" bootstrap method is not valid when volatility is time-varying. The failure of the blocks of blocks bootstrap is due to the heterogeneity of the squared pre-averaged returns when volatility is stochastic. To preserve both the dependence and the heterogeneity of squared pre-averaged returns, we propose a novel procedure that combines the wild bootstrap with the blocks of blocks bootstrap. We provide a proof of the first order asymptotic validity of this method for percentile and percentile-t intervals. Our Monte Carlo simulations show that the wild blocks of blocks bootstrap improves the finite sample properties of the existing first order asymptotic theory. We use empirical work to illustrate its use in practice.
    Keywords: Block bootstrap, high frequency data, market microstructure noise, preaveraging, realized volatility, wild bootstrap.
    Date: 2017–05
  2. By: Dovonon, Prosper; Goncalves, Silvia; Hounyo, Ulrich; Meddahi, Nour
    Date: 2017–05
  3. By: Siekmann, Manuel
    Abstract: Edgeworth cycles represent the leading concept to explain observed pricing patterns on retail gasoline markets and have been subject to numerous empirical investigations on an interday level. In this paper, I present unique evidence of the presence, causes, and price effects of intraday Edgeworth-type cycles for an entire OECD country, using high-frequency price data from German gasoline stations. I find vast evidence of intraday cycles across municipalities in Germany. Cycle asymmetry and intensity is stronger in more concentrated markets and decreases with a higher share of non-major brands. My analysis suggests that intraday cycles are a sign of competition with a price decreasing effect during evening hours, where consumers conscious of their purchase timing can benefit most.
    Keywords: Gasoline Markets,Fuel Prices,Edgeworth Cycles,Intraday Pricing
    JEL: L11 L71
    Date: 2017

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