Realized Volatility or Price Range: Evidence from a Discrete Simulation of the Continuous Time Diffusion Process

16 Pages Posted: 25 Oct 2018

See all articles by Stavros Antonios Degiannakis

Stavros Antonios Degiannakis

Department of Economic and Regional Development, Panteion University of Political and Social Sciences

Alexandra Livada

Athens University of Economics and Business - Department of Statistics

Date Written: 2013

Abstract

The study provides evidence in favour of the price range as a proxy estimator of volatility in financial time series, in the cases that either intra-day datasets are unavailable or they are available at a low sampling frequency.

A stochastic differential equation with time varying volatility of the instantaneous logreturns process is simulated, in order to mimic the continuous time diffusion analogue of the discrete time volatility process. The simulations provide evidence that the price range measures are superior to the realized volatility constructed at low sampling frequency. The high-low price range volatility estimator is more accurate than the realized volatility estimator based on five, or less, equidistance points in time. The open-high-low-close price range is more accurate than the realized volatility estimator based on eight, or less, intraperiod log-returns.

Keywords: Integrated Volatility, Intra-day Volatility, Price range, Realized volatility, Stochastic Differential Equation

JEL Classification: C15, C53, G17

Suggested Citation

Degiannakis, Stavros Antonios and Livada, Alexandra, Realized Volatility or Price Range: Evidence from a Discrete Simulation of the Continuous Time Diffusion Process (2013). Available at SSRN: https://ssrn.com/abstract=3259767 or http://dx.doi.org/10.2139/ssrn.3259767

Stavros Antonios Degiannakis (Contact Author)

Department of Economic and Regional Development, Panteion University of Political and Social Sciences ( email )

136 Sygrou
Athens
Greece

Alexandra Livada

Athens University of Economics and Business - Department of Statistics ( email )

Athens
Greece

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