T. Hayashi (USA) and N. Yoshida (Japan)
consistency; diffusions; nonsynchronous trading; quadraticvariation; realized volatility
We consider the problem of estimating the covari ance/correlation of two diffusion prices that are observed at discrete times in a nonsynchronous manner. The mod ern, popular approach in the literature, "realized" estima tor, which is based on the sum of cross-products of intra day log-price changes measured on regularly-spaced inter vals over a day, is problematic because choice of regular interval size and data interpolation scheme may lead to un reliable estimation. We present a new estimation procedure recently proposed by [1], which is free of such "synchro nization" of data, hence, free from biases or other problems caused by it. In particular, our estimators are shown to have consistency as the observation frequency (or the market liq uidity) tends to infinity, which is not possessed by the real ized estimators.
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