Optimal Sampling for the Detection of Market Microstructure Noise
Optimal Sampling for the Detection of Market Microstructure Noise

Author(s): Juraj Hruška, Oleg Deev
Subject(s): Evaluation research, Financial Markets
Published by: Masarykova univerzita nakladatelství
Keywords: market microstructure noise; optimal sampling; LM test;
Summary/Abstract: Volatility patterns and its dynamics are the core measures of risk in the financial theory. However, given the algorithmic nature of modern securities trading, frequently used parametric volatility models should be used with great caution when applied on high frequency data. Modelling volatility in high frequency data is fairly complex since such data contains a disruptive volatility component, which only occurs in this kind of data and is not observable in lower frequency data.

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