Template-type: ReDIF-Paper 1.0
Author-Name: Manabu Asai
Author-Email: m-asai@soka.ac.jp 
Author-Person: pas73 
Author-Workplace-Name: Faculty of Economics Soka University, Japan
Author-Workplace-Homepage: https://www.soka.ac.jp/economics/
Author-Name: Michael McAleer
Author-Person: pmc90 
Author-Workplace-Name: Econometrisch Instituut (Econometric Institute), Faculteit der Economische Wetenschappen (Erasmus School of Economics)
	Erasmus Universiteit, Tinbergen Instituut (Tinbergen Institute).
Author-Name: Marcelo C. Medeiros
Author-Email: mcm@econ.puc-rio.br
Author-Person: pme53 
Author-Workplace-Name: Department of Economics Pontifical Catholic University of Rio de Janeiro(PUC-Rio) 
Author-Workplace-Homepage: http://www.econ.puc-rio.br/
Title: Modelling and Forecasting Noisy Realized Volatility
Abstract: Several methods have recently been proposed in the ultra high frequency financial literature to remove 
	the effects of microstructure noise and to obtain consistent estimates of the integrated volatility (IV) 
	as a measure of ex-post daily volatility. Even bias-corrected and consistent realized volatility (RV) 
	estimates of IV can contain residual microstructure noise and other measurement errors. Such noise is 
	called “realized volatility error”. As such errors are ignored, we need to take account of them in 
	estimating and forecasting IV. This paper investigates through Monte Carlo simulations the effects of 
	RV errors on estimating and forecasting IV with RV data. It is found that: (i) neglecting RV errors can 
	lead to serious bias in estimators; (ii) the effects of RV errors on one-step ahead forecasts are minor 
	when consistent estimators are used and when the number of intraday observations is large; and (iii) even 
	the partially corrected 2R recently proposed in the literature should be fully correcte	d for evaluating 
	forecasts. This paper proposes a full correction of 2 R . An empirical example for S&P 500 data is used 
	to demonstrate the techniques developed in the paper.
Classification-JEL: G32, G11, G17, C53, C22.
Keywords: realized volatility; diffusion; financial econometrics; measurement errors; forecasting; model evaluation; goodness-of-fit.
Length: 37 pages 
Creation-Date: 2011 
Number: 2011-09
X-File-Ref: http://america.sim.ucm.es/repec/ucm/ref/doicae1109.txt
File-URL: https://eprints.ucm.es/id/eprint/12562/1/1109.pdf
File-Format: Application/pdf
Handle: RePEc:ucm:doicae:1109