SFB 649 Discussion Paper 2007-052 Capturing Common Components in High- Frequency Financial Time Series: A Multivariate Stochastic Multiplicative Error Model Nikolaus Hautsch* * Humboldt-Universität zu Berlin, Germany This research was supported by the Deutsche...

We model the dynamics of ask and bid curves in a limit order book market using a dynamic semiparametric factor model. The shape of the curves is captured by a factor structure which is estimated nonparametrically. Corresponding factor loadings are assumed to follow multivariate dynamics and are...

We introduce a regularization and blocking estimator for well-conditioned high-dimensional daily covariances using high-frequency data. Using the Barndorff-Nielsen, Hansen, Lunde, and Shephard (2008a) kernel estimator, we estimate the covariance matrix block-wise and regularize it. A data-driven...