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MaPhySto
Centre for Mathematical Physics and Stochastics
Department of Mathematical Sciences, University of Aarhus

Funded by The Danish National Research Foundation

MPS-RR 2002-14
April 2002




Econometric analysis of realised covariation: high frequency covariance, regression and correlation in financial economics

by:

Ole E. Barndorff-Nielsen

Neil Shephard

Abstract

This paper analyses multivariate high frequency financial data using realised covariation. We provide a new asymptotic distribution theory for standard methods such as regression, correlation analysis and covariance. It will be based on a fixed interval of time (e.g. a day or week), allowing the number of high frequency returns during this period to go to infinity. Our analysis allows us to study how high frequency correlations, regressions and covariances change through time. In particular we provide confidence intervals for each of these quantities.

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This paper has now been published in Econometrica. To appear