Drift Independent Volatility Estimation Based on High, Low, Open, and Close Prices

Posted: 19 Sep 2000

See all articles by Dennis Yang

Dennis Yang

Clearview Trading LLC

Qiang Zhang

City University of Hong Kong (CityU) - Department of Economics & Finance

Abstract

We present a new volatility estimator based on multiple periods of high, low, open, and close prices in a historical time series. The new estimator has the following nice properties: it is (a) unbiased in the continuous limit, (b) independent of the drift, (c) consistent in dealing with opening price jumps. Furthermore, it has the smallest variance among all estimators with similar properties. The improvement of accuracy over the classical close-to-close estimator is dramatic for real-life time series.

JEL Classification: C00

Suggested Citation

Yang, Dennis and Zhang, Qiang, Drift Independent Volatility Estimation Based on High, Low, Open, and Close Prices. The Journal of Business, Vol. 73, No. 3, July 2000, Available at SSRN: https://ssrn.com/abstract=229190

Dennis Yang

Clearview Trading LLC ( email )

Qiang Zhang (Contact Author)

City University of Hong Kong (CityU) - Department of Economics & Finance ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong

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