Bootstrapping realized multivariate volatility measures

• Published in: Journal of econometrics Vol. 172; no. 1; pp. 49 - 65
• Main Authors: Dovonon, Prosper, Gonçalves, Sílvia, Meddahi, Nour
• Format: Journal Article
• Language: English
• Published: Amsterdam Elsevier B.V 01.01.2013; Elsevier; Elsevier Sequoia S.A
• Subjects: Asymptotic methods; Bootstrap; Bootstrap mechanism; Bootstrap method; Coefficient of correlation; correlation; covariance; econometrics; Edgeworth expansions; heteroskedasticity; Multivariate analysis; Realized beta; Realized correlation; Realized regression; Regression analysis; Stochastic processes; Studies; Volatility; Edgeworth expansions; C12; C15; C14; Bootstrap; Realized correlation; Realized regression; Realized beta
• ISSN: 0304-4076; 1872-6895
• DOI: 10.1016/j.jeconom.2012.08.003

We propose a bootstrap method for statistics that are a function of multivariate high frequency returns such as realized regression, covariance and correlation coefficients. We show that the finite sample performance of the bootstrap is superior to the existing first-order asymptotic theory. Nevertheless, and contrary to the existing results in the bootstrap literature for regression models subject to error heteroskedasticity, the Edgeworth expansion for the pairs bootstrap that we develop here shows that this method is not second-order accurate. We argue that this is due to the fact that the conditional mean parameters of realized regression models are heterogeneous under stochastic volatility.