On the robustness of range-based volatility estimators

Ozgur Akay, Mark D. Griffiths, Drew B. Winters

Research output: Contribution to journalArticle

6 Scopus citations

Abstract

We empirically examine Parkinson's range-based volatility estimate in the federal funds market, which is unique because institutional regulations create a predictable pattern in interday volatility. We find that range-based volatility estimates and standard deviations produce the expected volatility pattern. We also find that at trading pressure points where microstructure noise should be greatest, range-based estimates are less than the standard deviations. Thus, we support the argument that range-based volatility estimates remove the upward bias created by microstructure noise. We find that the Parkinson method is the most efficient range-based volatility measure among a set of alternates in this market.

Original languageEnglish
Pages (from-to)179-199
Number of pages21
JournalJournal of Financial Research
Volume33
Issue number2
DOIs
StatePublished - Jun 2010

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