Publication Type

Journal Article

Version

acceptedVersion

Publication Date

9-2017

Abstract

We derive the asymptotic efficiency bound for regular estimates of the slope coefficient in a linear continuous-time regression model for the continuous martingale parts of two Itô semimartingales observed on a fixed time interval with asymptotically shrinking mesh of the observation grid. We further construct an estimator from high-frequency data that achieves this efficiency bound and, indeed, is adaptive to the presence of infinite-dimensional nuisance components. The estimator is formed by taking optimal weighted average of local nonparametric volatility estimates that are constructed over blocks of high-frequency observations. The asymptotic efficiency bound is derived under a Markov assumption for the bivariate process while the high-frequency estimator and its asymptotic properties are derived in a general Itô semimartingale setting. To study the asymptotic behavior of the proposed estimator, we introduce a general spatial localization procedure which extends known results on the estimation of integrated volatility functionals to more general classes of functions of volatility. Empirically relevant numerical examples illustrate that the proposed efficient estimator provides nontrivial improvement over alternatives in the extant literature.

Keywords

Adaptive estimation, Beta, Stochastic volatility, Spot variance, Semiparametric efficiency, High-frequency data

Discipline

Econometrics

Research Areas

Econometrics

Publication

Journal of Econometrics

Volume

200

Issue

1

First Page

36

Last Page

47

ISSN

0304-4076

Identifier

10.1016/j.jeconom.2017.01.010

Publisher

Elsevier

Copyright Owner and License

Authors

Additional URL

https://doi.org/10.1016/j.jeconom.2017.01.010

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