Data Frequency and Estimation Risk

4 Pages Posted: 13 Sep 2012

Date Written: September 12, 2012

Abstract

We discuss the widespread belief that using a higher data frequency, i.e. calculating with more observations, will lower estimation risk. For example, it is often believed that calculating annualized volatility from daily returns will be more “accurate” than calculating annualized volatility from annual returns over the same period of time. We show that in the best case, estimation risk will not be affected by the data frequency. We also show that in more realistic cases, estimation risk may even increase.

Keywords: Data Frequency, Estimation Risk, IID, GARCH, Volatility, Expected Return, Estimation

Suggested Citation

Steiner, Andreas, Data Frequency and Estimation Risk (September 12, 2012). Available at SSRN: https://ssrn.com/abstract=2145178 or http://dx.doi.org/10.2139/ssrn.2145178

Andreas Steiner (Contact Author)

Andreas Steiner Consulting GmbH ( email )

Walderstrasse 43c
Hinwil, 8340
Switzerland

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