Journal ArticleJournal of Financial Econometrics · January 1, 2024
We generate new evidence on disagreement among traders in the S&P 500 options market from high-frequency intraday price and volume data. Inference on disagreement is based on a model where investors observe public information but agree to disagree on its i ...
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Journal ArticleJournal of Econometrics · May 1, 2022
This paper studies the efficient estimation of betas from high-frequency return data on a fixed time interval. Under an assumption of equal diffusive and jump betas, we derive the semiparametric efficiency bound for estimating the common beta and develop a ...
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Journal ArticleJournal of Risk and Financial Management · March 1, 2021
We developed a model-free Bayesian extraction procedure for the stochastic discount factor under a yield curve prior. Previous methods in the literature directly or indirectly use some particular parametric asset-pricing models such as with long-run risks ...
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Journal ArticleQuantitative Economics · May 1, 2019
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We develop tests for deciding whether a large cross-section of asset prices obey an exact factor structure at the times of factor jumps. Such jump dependence is implied by standard linear factor models. Our inference is based on a panel of asset returns wi ...
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Journal ArticleJournal of Business and Economic Statistics · April 3, 2019
We propose a test for the rank of a cross-section of processes at a set of jump events. The jump events are either specific known times or are random and associated with jumps of some process. The test is formed from discretely sampled data on a fixed time ...
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Journal ArticleJournal of Econometrics · July 1, 2018
We modify the Gallant and Tauchen (1996) efficient method of moments (EMM) method to perform exact Bayesian inference, where exact means no reliance on asymptotic approximations. We use this modification to evaluate the empirical plausibility of recent pre ...
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Journal ArticleJournal of Econometrics · December 1, 2017
We develop an efficient mixed-scale estimator for jump regressions using high-frequency asset returns. A fine time scale is used to accurately identify the locations of large rare jumps in the explanatory variables such as the price of the market portfolio ...
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Journal ArticleJournal of Econometrics · September 1, 2017
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 shrin ...
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Journal ArticleEconometric Theory · October 1, 2016
We propose a consistent functional estimator for the occupation time of the spot variance of an asset price observed at discrete times on a finite interval with the mesh of the observation grid shrinking to zero. The asset price is modeled nonparametricall ...
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Journal ArticleJournal of Econometrics · July 1, 2016
We develop inference theory for models involving possibly nonlinear transforms of the elements of the spot covariance matrix of a multivariate continuous-time process observed at high frequency. The framework can be used to study the relationship among the ...
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Journal ArticleEconomic Research Initiatives at Duke (ERID) · September 17, 2015
This paper develops a method to select the threshold in threshold-based jump detection methods. The method is motivated by an analysis of threshold-based jump detection methods in the context of jump-diffusion models. We show that over the range of samplin ...
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Journal ArticleStochastic Processes and their Applications · August 1, 2015
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 ...
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Journal ArticleJournal of Econometrics · August 1, 2015
We analyze the high-frequency dynamics of S&P 500 equity-index option prices by constructing an assortment of implied volatility measures. This allows us to infer the underlying fine structure behind the innovations in the latent state variables driving th ...
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Journal ArticleJournal of Econometrics · January 1, 2014
The paper examines volatility activity and its asymmetry and undertakes further specification analysis of volatility models based on it. We develop new nonparametric statistics using high-frequency option-based VIX data to test for asymmetry in volatility ...
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Journal ArticleAnnals of Applied Probability · January 1, 2014
We derive limit theorems for the empirical distribution function of "devolatilized" increments of an Itô semimartingale observed at high frequencies. These "devolatilized" increments are formed by suitably rescaling and truncating the raw increments to rem ...
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Journal ArticleAnnals of Statistics · 2013
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We propose nonparametric estimators of the occupation measure and the occupation density of the diffusion coefficient (stochastic volatility) of a discretely observed Itô semimartingale on a fixed interval when the mesh of the observation grid shrinks to z ...
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Journal ArticleEconometrica · 2012
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We introduce and derive the asymptotic behavior of a new measure constructed from high-frequency data which we call the realized Laplace transform of volatility. The statistic provides a nonparametric estimate for the empirical Laplace transform function o ...
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Journal ArticleReview of Finance · 2012
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Stock market volatility clusters in time, appears fractionally integrated, carries a risk premium, and exhibits asymmetric leverage effects. At the same time, the volatility risk premium, defined by the difference between the risk-neutral and objective exp ...
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Journal ArticleJournal of the American Statistical Association · 2012
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This article develops a nonparametric estimator of the stochastic volatility density of a discretely observed Itô semimartingale in the setting of an increasing time span and finer mesh of the observation grid. There are two basic steps involved. The first ...
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Journal ArticleAnnals of Statistics · 2012
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We consider specification and inference for the stochastic scale of discretely-observed pure-jump semimartingales with locally stable Lévy densities in the setting where both the time span of the data set increases, and the mesh of the observation grid dec ...
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Journal ArticleJournal of Econometrics · October 1, 2011
We develop an efficient and analytically tractable method for estimation of parametric volatility models that is robust to price-level jumps. The method entails first integrating intra-day data into the Realized Laplace Transform of volatility, which is a ...
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Journal ArticleJournal of Economic Dynamics and Control · June 1, 2011
We develop an equilibrium endowment economy with Epstein-Zin recursive utility and a Lévy time-change subordinator, which represents a clock that connects business and calendar time. Our setup provides a tractable equilibrium framework for pricing non-Gaus ...
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Journal ArticleJournal of Business and Economic Statistics · 2011
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The article undertakes a nonparametric analysis of the high-frequency movements in stock market volatility using very finely sampled data on the VIX volatility index compiled from options data by the CBOE. We derive theoretically the link between pathwise ...
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Journal ArticleJournal of Econometrics · January 1, 2011
This paper extends the jump detection method based on bipower variation to identify realized jumps on financial markets and to estimate parametrically the jump intensity, mean, and variance. Finite sample evidence suggests that the jump parameters can be a ...
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Journal ArticleAnnals of Applied Probability · 2011
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This paper derives the asymptotic behavior of realized power variation of pure-jump Itô semimartingales as the sampling frequency within a fixed interval increases to infinity. We prove convergence in probability and an associated central limit theorem for ...
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Journal Article · December 1, 2010
This chapter describes a simulated method of moments estimator that is implemented by choosing the vector valued moment function to be the expectation under the structural model of the score function of an auxiliary model, where the parameters of the auxil ...
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Journal ArticleJournal of Econometrics · February 1, 2010
We define a new concept termed activity signature function, which is constructed from discrete observations of a continuous-time process, and derive its asymptotic properties as the sampling frequency increases. We show that the function is a useful device ...
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Journal ArticleReview of Financial Studies · November 1, 2009
Motivated by the implications from a stylized self-contained general equilibrium model incorporating the effects of time-varying economic uncertainty, we show that the difference between implied and realized variation, or the variance risk premium, is able ...
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Journal ArticleJournal of Econometrics · June 1, 2009
We develop an empirically highly accurate discrete-time daily stochastic volatility model that explicitly distinguishes between the jump and continuous-time components of price movements using nonparametric realized variation and Bipower variation measures ...
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Journal ArticleJournal of Econometrics · May 1, 2008
We test for price discontinuities, or jumps, in a panel of high-frequency intraday stock returns and an equiweighted index constructed from the same stocks. Using a new test for common jumps that explicitly utilizes the cross-covariance structure in the re ...
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Journal ArticleReview of Economic Studies · 2007
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The paper estimates and examines the empirical plausibility of asset pricing models that attempt to explain features of financial markets such as the size of the equity premium and the volatility of the stock market. In one model, the long-run risks (LRR) ...
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Journal ArticleJournal of Business and Economic Statistics · October 1, 2006
We develop simulation schemes for the new classes of non-Gaussian pure jump Lévy processes for stochastic volatility. We write the price and volatility processes as integrals against a vector Lévy process, which makes series approximation methods directly ...
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Journal ArticleJournal of Financial Econometrics · June 1, 2006
We examine the relationship between volatility and past and future returns using high-frequency aggregate equity index data. Consistent with a prolonged "leverage" effect, we find the correlations between absolute high-frequency returns and current and pas ...
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Journal ArticleJournal of Business and Economic Statistics · October 1, 2004
Recent evidence indicates that using multiple forward rates sharply predicts future excess returns on U.S. Treasury Bonds, with the R2's being around 30%. The projection coefficients in these regressions exhibit a distinct pattern that relates to the matur ...
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Journal ArticleJournal of Econometrics · September 1, 2003
This paper evaluates the role of various volatility specifications, such as multiple stochastic volatility (SV) factors and jump components, in appropriate modeling of equity return distributions. We use estimation technology that facilitates nonnested mod ...
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Journal ArticleJournal of Econometrics · January 1, 2003
The papers in this volume represent the most recent advances in the intersection of the fields of financial econometrics and financial engineering. A collection of papers presented at a conference organized by the Guest Editors in collaboration with Robert ...
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Journal ArticleJournal of Empirical Finance · December 1, 2001
The pure expectations theory of unbiased forward exchange rates predicts that the slope coefficient in a regression of the change in the spot rate on the difference between the current forward and spot rates should equal unity. In the recent empirical work ...
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Journal ArticleJournal of Business and Economic Statistics · January 1, 2001
The objectives of this article are threefold - (1) to test target-zone models using more efficient and direct econometric methodology than previous research, (2) to identity an implicit hand, if it exists, from observed data and to test target-zone models ...
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Journal ArticleJournal of Econometrics · January 1, 2001
The first part of the discussion reviews recent successes in modeling of discrete time financial data and argues that a direct approach is better suited than stochastic volatility. The second part reviews recent work on estimating continuous time models wi ...
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Journal ArticleJournal of Econometrics · January 1, 1999
The asymptotic relative efficiency of efficient method of moments when implemented with a seminonparametric auxiliary model is compared to that of conventional method of moments when implemented with polynomial moment functions. Because the expectations re ...
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Journal ArticleReview of Economics and Statistics · January 1, 1999
A common model for security price dynamics is the continuous-time stochastic volatility model. For this model, Hull and White (1987) show that the price of a derivative claim is the conditional expectation of the Black-Scholes price with the forward integr ...
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Journal ArticleJournal of the American Statistical Association · March 1, 1998
We introduce reprojection as a general purpose technique for characterizing the dynamic response of a partially observed nonlinear system to its observable history. Reprojection is the third step of a procedure wherein first data are summarized by projecti ...
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Journal ArticleReview of Economics and Statistics · 1998
The paper examines the role of stability constraints in estimation by dynamic simulation. In particular, it analyzes the behavior of the objective function on either side of the boundary of the stability region of the parameter space. The main finding is t ...
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Journal ArticleMacroeconomic Dynamics · December 1, 1997
Efficient Method of Moments is used to estimate and test continuous-time diffusion models for stock returns and interest rates. For stock returns, a four-state, two-factor diffusion with one state observed can account for the dynamics of the daily return o ...
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Journal ArticleJournal of Econometrics · January 1, 1997
Efficient method of moments (EMM) is used to fit the standard stochastic volatility model and various extensions to several daily financial time series. EMM matches to the score of a model determined by data analysis called the score generator. Discrepanci ...
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Journal ArticleEconometric Theory · January 1, 1996
We describe an intuitive, simple, and systematic approach to generating moment conditions for generalized method of moments (GMM) estimation of the parameters of a structural model. The idea is to use the score of a density that has an analytic expression ...
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Journal ArticleJournal of Econometrics · January 1, 1996
This paper uses dynamic impulse response analysis to investigate the interrelationships among stock price volatility, trading volume, and the leverage effect. Dynamic impulse response analysis is a technique for analyzing the multi-step-ahead characteristi ...
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Journal ArticleJournal of Econometrics · January 1, 1995
Empirical modeling of high-frequency currency market data reveals substantial evidence for nonnormality, stochastic volatility, and other nonlinearities. This paper investigates whether an equilibrium monetary model can account for nonlinearities in weekly ...
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Journal ArticleJournal of Econometrics · January 1, 1990
Previously Hansen and Jagannathan (1990a) derived and computed mean-standard deviation frontiers for intertemporal marginal rates of substitution (IMRS) implied by asset market data. These frontiers give the lower bounds on the standard deviations as a fun ...
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Journal Article · 1986
The article examines the properties of generalized method of moments GMM estimators of utility function parameters. The research strategy is to apply the GMM procedure to generated data on asset returns from stochastic exchange economies; discrete methods ...
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Journal ArticleEconomics Letters · January 1, 1986
This paper derives under simplifying assumptions an explicit expression for the lower bound on the asymptotic variance of the GMM estimate of the curvature parameter of the CRR utility function. Numerical calculations indicate that qualitative conclusions ...
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Journal ArticleEconomics Letters · January 1, 1986
The paper develops a procedure for finding a discrete-valued Markov chain whose sample paths approximate well those of a vector autoregression. The procedure has applications in those areas of economics, finance, and econometrics where approximate solution ...
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Journal ArticleJournal of Econometrics · January 1, 1985
The paper develops a unified theory of likelihood specification testing based on M-estimators of auxiliary parameters. The theory is sufficiently general to encompass a wide class of specification tests including moment-based tests, Pearson-type goodness o ...
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Journal ArticleJournal of the American Statistical Association · January 1, 1982
The article develops the structure and estimates the parameters of a nonlinear learning model applicable to research designs in which students are tested at the beginning and end of a course of study. A student’s precourse score is an error-ridden proxy fo ...
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Scholarly Edition
The paper estimates and examines the empirical plausibiltiy of asset pricing models that attempt to explain features of financial markets such as the size of the equity premium and the volatility of the stock market. In one model, the long run risks model ...
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The dynamic dependencies in financial market volatility are generally well described by a long-memory fractionally integrated process. At the same time, the volatility risk premium, defined as the difference between the ex-post realized volatility and the ...
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