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Roberto RENO (University of Verona) “Realized drift”

June 17, 2021 @ 11:00 am - 12:00 pm
The Financial Econometrics Seminar: 
Time: 11:00 pm
Date: 17th of June 2021
by Zoom

Roberto RENO (University of Verona) “Realized drift”

Abstract : Drift and volatility are two mainsprings of asset price dynamics. While volatilities have been studied extensively in the literature, drifts are commonly believed to be impossible to
estimate and largely ignored in the literature. This paper proposes using realized autoco-variance for the estimation of drifts and shows that the realized autocovariance estimator is dominated by the drift in high-frequency data. We do so using a theoretical treatment in which the efficient price is enriched with drift and volatility explosions; simulations that allow for market microstructure noise; and an empirical analysis corroborating the theoretical analysis by showing that serial autocovariance peaks exactly at times of sustained trends.

Joint work : Sébastien LAURENT (Aix-Marseille University), Shuping SHI (Macquarie University)



Jean-Michel ZAKOIAN  (CREST)