Research Interests:
Research Interests:
Financial Econometrics, Market Microstructure
Financial Econometrics, Market Microstructure
Multi-Horizon Test for Market Efficiency, with Xiye Yang.
Abstract
We investigate market efficiency by detecting transitory deviations of asset prices from fundamental values, based on the joint inference of return covariances across multiple horizons. We demonstrate that a small set of horizons suffices to identify a broad spectrum of deviations, both theoretically and practically. Our method works for high-and low-frequency data under different asymptotic regimes. Extensive simulations show our method outperforms widely used state-of-the-art tests. Our empirical studies indicate that intraday transaction prices from recent years can be considered efficient at significantly higher frequencies.
Paper. Code (Matlab, Python, and R packages). Supplementary Materials.
Li, Z. Merrick, and Oliver Linton (2024). "Robust Estimation of Integrated and Spot Volatility". Forthcoming, Journal of Econometrics.
Li, Z. Merrick, and Oliver Linton (2022). "A ReMeDI for Microstructure Noise." Econometrica, 90, 367-389.
Supplementary Materials. Matlab Code. R Code (developed by Emil Sjoerup).
Li, Z. Merrick, Roger JA Laeven, and Michel H. Vellekoop (2020). "Dependent microstructure noise and integrated volatility estimation from high-frequency data." Journal of Econometrics, 215, 536–558.