ReMeDIAsymptoticVariance {highfrequency}

Asymptotic variance of ReMeDI estimator

Description

Estimates the asymptotic variance of the ReMeDI estimator.

Usage

ReMeDIAsymptoticVariance(pData, kn, lags, phi, i)

Arguments

pData

xts or data.table containing the log-prices of the asset

kn

numerical value determining the tuning parameter kn this controls the lengths of the non-overlapping interval in the ReMeDI estimation

lags

numeric containing integer values indicating the lags for which to estimate the (co)variance

phi

tuning parameter phi

i

tuning parameter i

Details

Some notation is needed for the estimator of the asymptotic covariance of the ReMeDI estimator. Let

\delta\left(n, i\right) = t_{i}^{n}-t_{t-1}^{n}, i\geq 1,

\hat{\delta}_{t}^{n}=\left(\frac{k_{n}\delta\left(n,i+1+k_{n}\right)-t_{i+2+2k_{n}}^{n}+t_{i+2+k_{n}}^{n}}{\left(t_{i+k_{n}}^{n}-t_{i}^{n}\right)\vee\phi_{n}}\right)^{2},

U\left(1\right)_{t}^{n}=\sum_{i=0}^{n_{t}-\omega\left(1\right)_{n}}\hat{\delta}_{i}^{n},

U\left(2,\boldsymbol{j}\right)_{t}^{n}=\sum_{i=0}^{n_{t}-\omega\left(2\right)_{n}}\hat{\delta}_{i}^{n}\Delta_{\boldsymbol{j}}\left(Y\right)_{i+\omega\left(2\right)_{2}^{n}}^{n},

U\left(3,\boldsymbol{j},\boldsymbol{j}'\right)_{t}^{n}=\sum_{i=0}^{n_{t}-\omega\left(3\right)_{n}}\hat{\delta}_{i}^{n}\Delta_{\boldsymbol{j}}\left(Y\right)_{i+\omega\left(3\right)_{2}^{n}}^{n}\Delta_{\boldsymbol{j}'}\left(Y\right)_{i+\omega\left(3\right)_{3}^{n}}^{n},

U\left(4;\boldsymbol{j},\boldsymbol{j}'\right)_{t}^{n}=-\sum_{i=2^{q-1}k_{n}}^{n_{t}-\omega\left(4\right)_{n}}\Delta_{\boldsymbol{j}}\left(Y\right)\Delta_{\boldsymbol{j}^{\prime}}\left(Y\right)_{i+\omega\left(3\right)_{3}^{n}}^{n},

U\left(5,k;\boldsymbol{j},\boldsymbol{j}'\right)_{t}^{n}=\sum_{Q_{q}\in\mathcal{Q}_{q}}\sum_{i=2^{e\left(Q_{q}\right)}k_{n}}^{n_{t}-\omega\left(5\right)_{n}}\Delta_{\boldsymbol{j}_{Q_{q}\oplus\left(\boldsymbol{j}\prime_{Q_{q'}}\left(+k\right)\right)}}\left(Y\right)_{i}^{n}\prod_{\ell:l_{\ell}\in Q_{q}^{c}}\Delta_{\left(j_{l_{\ell}},j\prime_{l_{\ell}}+k\right)\left(Y\right)_{i+\omega\left(5\right)_{\ell+1}^{n}\prime}},

U\left(6,k;\boldsymbol{j},\boldsymbol{j}^{\prime}\right)=\sum_{j_{l}\in\boldsymbol{j},j_{l^{\prime}}^{\prime}\in\boldsymbol{j}^{\prime}}\sum_{i=2k_{n}}^{n_{t}-\omega\left(6\right)n}\Delta_{\left(j_{l},j_{l^{\prime}}^{\prime}+k\right)}\left(Y\right)_{i}^{n}\Delta_{\boldsymbol{j}_{-l}}\left(Y\right)_{i+\omega\left(6\right)_{2}^{n}}^{n}\Delta_{\boldsymbol{j}_{-l^{\prime}}^{\prime}}\left(Y\right)_{i+\omega\left(6\right)_{3}^{n}}^{n} \\ -\sum_{j_{l}\in\boldsymbol{j}}\sum_{i=2^{q}k_{n}}^{n_{t}-\omega^{\prime}\left(6\right)_{n}}\Delta_{\left\{ j_{l}\right\} \oplus\boldsymbol{j}^{\prime}\left(+k\right)}\left(Y\right)_{i}^{n}\Delta_{\boldsymbol{j}-l}\left(Y\right)_{i+\omega^{\prime}\left(6\right)_{2}^{n}}^{n} \\ -\sum_{j_{l^{\prime}\in\boldsymbol{j}^{\prime}}^{\prime}}\sum_{i=2^{q}k_{n}}^{n_{t}-\omega^{\prime\prime}\left(6\right)n}\Delta_{\left\{ j_{l^{\prime}}^{\prime}+k\right\} \oplus\boldsymbol{j}}\left(Y\right)_{i}^{n}\Delta_{\boldsymbol{j}_{-l^{\prime}}^{\prime}}\left(Y\right)_{i+\omega^{\prime\prime}\left(6\right)_{2}^{n}\prime}^{n},

U\left(7,k;\boldsymbol{j},\boldsymbol{j}^{\prime}\right)_{t}^{n}=ReMeDI\left(\boldsymbol{j}\oplus\boldsymbol{j}^{\prime}\left(+k\right)\right)_{t}^{n},

U\left(k;\boldsymbol{j},\boldsymbol{j}^{\prime}\right)_{t}^{n}=\sum_{\ell=5}^{7}U\left(\ell,k;\boldsymbol{j},\boldsymbol{j}^{\prime}\right)_{t}^{n},

U\left(k;\boldsymbol{j},\boldsymbol{j}^{\prime}\right)_{t}^{n}=\sum_{\ell=5}^{7}U\left(\ell,k;\boldsymbol{j},\boldsymbol{j}^{\prime}\right)_{t}^{n},

Where the indices are given by:

\omega\left(1\right)_{n}=2+2k_{n},\ \omega\left(2\right)_{2}^{n}=2+\left(3+2^{q-1}\right)k_{n},\ \omega\left(2\right)_{n}=\omega\left(2\right)_{2}^{n}+j_{1}+k_{n},

\omega\left(3\right)_{2}^{n}=2+\left(3+2^{q-1}\right)k_{n},\ \omega\left(3\right)_{3}^{n}=2+\left(5+2^{q-1}+2^{q^{\prime}-1}\right)k_{n}+j_{1},

\omega\left(3\right)_{n}=\omega\left(3\right)_{3}^{n}+j_{1}^{\prime}+k_{n},\ \omega\left(4\right)_{2}^{n}=2k_{n}+q_{n}^{\prime}+j_{1},\ \omega\left(4\right)_{n}=\omega\left(4\right)_{2}^{n}+j_{1}^{\prime}+k_{n},

e\left(Q_{q}\right)=\left(2\left|Q_{q}\right|+q^{\prime}-q-1\right)\vee1,\ \omega\left(5\right)_{\ell+1}^{n}=4\ell k_{n}+\sum_{\ell^{\prime}=1}^{\ell}j_{l_{\ell^{\prime}}}\vee\left(j_{l_{\ell}}^{\prime}+k\right)\textrm{for}\ell\geq 1,

\omega\left(5\right)_{n}=\omega\left(5\right)_{\left|Q_{q}^{c}\right|+1}^{n}+j_{l_{\left|Q_{q}^{c}\right|}}\vee\left(j_{l_{\left|Q_{q}^{c}\right|}}+k\right)+k_{n},

\omega\left(6\right)_{2}^{n}=\left(2^{q-2}+2\right)k_{n}+j_{\ell}\vee\left(j_{\ell^{\prime}}^{\prime}+k\right),\ \omega\left(6\right)_{3}^{n}=\left(2^{q-2}+2^{q^{\prime}-2}+2\right)k_{n}+j_{1}+j_{\ell}\vee\left(j_{\ell}^{\prime}+k\right),

\omega^{\prime}\left(6\right)_{2}^{n}=\left(2^{q-2}+2\right)k_{n}+j_{\ell}\vee\left(j_{1}^{\prime}+k\right),\ \omega^{\prime\prime}\left(6\right)_{2}^{n}=\left(2^{q^{\prime}-2}+1\right)k_{n}+\left(j_{\ell^{\prime}}^{\prime}+k\right)\vee j_{1},

\omega\left(6\right)_{n}=\omega\left(6\right)_{3}^{n}+j^{\prime}+k_{n},\ \omega^{\prime}\left(6\right)_{n}=\omega^{\prime}\left(6\right)_{2}^{n}+j_{1}+k_{n},\ \omega^{\prime\prime}\left(6\right)_{n}=\omega^{\prime\prime}\left(6\right)_{2}^{n}j_{1}^{\prime}+k_{n},

The asymptotic variance estimator is then given by

\hat{\sigma}\left(\boldsymbol{j},\boldsymbol{j}^{\prime}\right)_{t}^{n}=\frac{1}{n_{t}}\sum_{\ell=1}^{3}\hat{\sigma}_{\ell}\left(\boldsymbol{j},\boldsymbol{j}^{\prime}\right)_{t}^{n},

where

\hat{\sigma}_{1}\left(\boldsymbol{j},\boldsymbol{j}^{\prime}\right)_{t}^{n}=U\left(0;\boldsymbol{j},\boldsymbol{j}^{\prime}\right)+\sum_{k=1}^{i_{n}}\left(U\left(k;\boldsymbol{j},\boldsymbol{j}^{\prime}\right)_{t}^{n}\right)+\left(2i_{n}+1\right)U\left(4;\boldsymbol{j},\boldsymbol{j}\right)_{t}^{n},

\hat{\sigma}_{2}\left(\boldsymbol{j},\boldsymbol{j}^{\prime}\right)_{t}^{n}=U\left(3;\boldsymbol{j},\boldsymbol{j}^{\prime}\right),

\hat{\sigma}_{3}\left(\boldsymbol{j},\boldsymbol{j}^{\prime}\right)_{t}^{n}=\frac{1}{n_{t}^{2}}\textrm{ReMeDI}\left(Y,\boldsymbol{j}\right)_{t}^{n}\textrm{ReMeDI}\left(Y,\boldsymbol{j}^{\prime}\right)_{t}^{n}U\left(1\right)_{t}^{n}\\,

-\frac{1}{n_{t}}\left(\textrm{ReMeDI}\left(Y,\boldsymbol{j}\right)_{t}^{n}U\left(2,\boldsymbol{j}^{\prime}\right)_{t}^{n}+\textrm{ReMeDI}\left(Y,\boldsymbol{j}^{\prime}\right)_{t}^{n}U\left(2,\boldsymbol{j}\right)_{t}^{n}\right),

Value

a list with components ReMeDI and asympVar containing the ReMeDI estimation and it's asymptotic variance respectively

Note

We Thank Merrick Li for contributing his Matlab code for this estimator.

Examples

kn <- knChooseReMeDI(sampleTDataEurope[, list(DT, PRICE)])

remedi <- ReMeDI(sampleTDataEurope[, list(DT, PRICE)], kn = kn, lags = 0:15)

asympVar <- ReMeDIAsymptoticVariance(sampleTDataEurope[, list(DT, PRICE)], 
                                     kn = kn, lags = 0:15, phi = 0.9, i = 2)