Cartea, Alvaro; Karyampas, Dimitrios - Departamento de Economía de la Empresa, Universidad … - 2009
Using high frequency data for the price dynamics of equities we measure the impact that market microstructure noise has on estimates of the: (i) volatility of returns; and (ii) variance-covariance matrix of n assets. We propose a Kalman-filter-based methodology that allows us to deconstruct...