Nonparametric test for a constant beta between Itô semi-martingales based on high-frequency data

Published

Journal Article

© 2015 Elsevier B.V. We derive a nonparametric test for constant beta over a fixed time interval from high-frequency observations of a bivariate Itô semimartingale. Beta is defined as the ratio of the spot continuous covariation between an asset and a risk factor and the spot continuous variation of the latter. The test is based on the asymptotic behavior of the covariation between the risk factor and an estimate of the residual component of the asset, that is orthogonal (in martingale sense) to the risk factor, over blocks with asymptotically shrinking time span. Rate optimality of the test over smoothness classes is derived.

Full Text

Duke Authors

Cited Authors

  • Reiß, M; Todorov, V; Tauchen, G

Published Date

  • August 1, 2015

Published In

Volume / Issue

  • 125 / 8

Start / End Page

  • 2955 - 2988

International Standard Serial Number (ISSN)

  • 0304-4149

Digital Object Identifier (DOI)

  • 10.1016/j.spa.2015.02.008

Citation Source

  • Scopus