Modelling realized variance when returns are serially correlated

This article examines the impact of serial correlation in high frequency returns on the realized variance measure. In particular, it is shown that the realized variance measure yields a biased estimate of the conditional return variance when returns are serially correlated. Using 10 years of FTSE-100 minute by minute data we demonstrate that a careful choice of sampling frequency is crucial in avoiding substantial biases. Moreover, we find that the autocovariance structure (magnitude and rate of decay) of FTSE-100 returns at different sampling frequencies is consistent with that of an ARMA process under temporal aggregation. A simple autocovariance function based method is proposed for choosing the “optimal” sampling frequency, that is, the highest available frequency at which the serial correlation of returns has a negligible impact on the realized variance measure. We find that the logarithmic realized variance series of the FTSE-100 index, constructed using an optimal sampling frequency of 25 minutes, can be modelled as an ARFIMA process. Exogenous variables such as lagged returns and contemporaneous trading volume appear to be highly significant regressors and are able to explain a large portion of the variation in daily realized variance. -- Dieser Artikel untersucht die Auswirkungen von autokorrelierten Erträgen auf das Maß der realisierten Varianz bei hochfrequenten Daten über die Erträge. Es wird gezeigt, dass die realisierte Varianz ein verzerrter Schätzer für die bedingte Varianz der Erträge bei Vorliegen von Autokorrelation ist. Unter Verwendung eines zehnjährigen Datensatzes von Minutendaten des FTSE-100 wird dargestellt, dass eine sorgfältige Auswahl der Stichprobenfrequenz unabdingbar zur Vermeidung von Verzerrungen ist. Eine einfache Methode zur Bestimmung der optimalen Stichprobenfrequenz, basierend auf der Autokovarianzfunktion, wird vorgeschlagen. Diese ergibt sich als die höchste Frequenz, bei der die vorhandene Autokorrelation noch einen vernachlässigbaren Einfluss auf das Maß der realisierten Varianz hat. Für den betrachteten Datensatz ergibt sich eine optimale Frequenz von 25 Minuten. Unter Verwendung dieser Frequenz können die logarithmierten Erträge des FTSE-100 als ARFIMA Prozess modelliert werden.High frequency data,realized return variance,market microstructure,temporal aggregation,long memory,bootstrap

Three essays on the econometric analysis of high frequency financial data.

This thesis is motivated by the observation that the time series properties of financial security prices can vary fundamentally with their sampling frequency. Econometric models developed for low frequency data may thus be unsuitable for high frequency data and vice versa. For instance, while daily or weekly returns are generally well described by a martingale difference sequence, the dynamics of intra-daily, say, minute by minute, returns can be substantially more complex. Despite this apparent conflict between the behavior of high and low frequency data, it is clear that the two are intimately related and that high frequency data carries a wealth of information regarding the properties of the process, also at low frequency. The objective of this thesis is to deepen our understanding of the way in which high frequency data can be used in financial econometrics. In particular, we focus on (i) how to model high frequency security prices, and (ii) how to use high frequency data to estimate latent variables such as return volatility. One finding throughout the thesis is that the choice of sampling frequency is of fundamental importance as it determines both the dynamics and the information content of the data. A more detailed description of the chapters follows below.Macroeconomics -- Models;

The role of public debt in the game of double chicken

This paper explores how debt accumulation is affected by the strategic interactions between monetary and fiscal authorities. To achieve the second best with a dependent central bank, the government needs to be made both more conservative and more impatient. However, in the absence of political distortions, an optimally designed conservative, independent central bank is sufficient to establish the second best. In the presence of political distortions, however, also an optimal debt target is needed. Keywords: Central bank independence, price stability weights, (optimal) debt targets, strategic debt management, political distortions, optimal preferences.public economics ;

Monetary union without fiscal coordination may discipline policymakers

We show that, with benevolent policymakers and fiscal leadership, monetary unification reduces inflation, taxes and public spending. These disciplining effects of a monetary union, which rise with the number of fiscal players in the union, are likely to raise welfare. Joining an optimally designed monetary union is particularly attractive if fiscal authorities do not care about inflation. Fiscal coordination offsets the disciplining effects of monetary unification. Hence, subsidiarity in fiscal policymaking may enhance welfare. Keywords: monetary union, fiscal leadership, common central bank, discipline, optimal institutions, inflation, taxation, spending, fiscal coordination.international economics and trade ;

A genome-wide survey of segmental duplications that mediate common human genetic variation of chromosomal architecture.

Recent studies have identified a small number of genomic rearrangements that occur frequently in the general population. Bioinformatics tools are now available for systematic genome-wide surveys of higher-order structures predisposing to such common variations in genomic architecture. Segmental duplications (SDs) constitute up to 5 per cent of the genome and play an important role in generating additional rearrangements and in disease aetiology. We conducted a genome-wide database search for a form of SD, palindromic segmental duplications (PSDs), which consist of paired, inverted duplications, and which predispose to inversions, duplications and deletions. The survey was complemented by a search for SDs in tandem orientation (TSDs) that can mediate duplications and deletions but not inversions. We found more than 230 distinct loci with higher-order genomic structure that can mediate genomic variation, of these about 180 contained a PSD. A number of these sites were previously identified as harbouring common inversions or as being associated with specific genomic diseases characterised by duplication, deletions or inversions. Most of the regions, however, were previously unidentified; their characterisation should identify further common rearrangements and may indicate localisations for additional genomic disorders. The widespread distribution of complex chromosomal architecture suggests a potentially high degree of plasticity of the human genome and could uncover another level of genetic variation within human populations

A blocking and regularization approach to high dimensional realized covariance estimation

We introduce a regularization and blocking estimator for well-conditioned high-dimensional daily covariances using high-frequency data. Using the Barndorff-Nielsen, Hansen, Lunde, and Shephard (2008a) kernel estimator, we estimate the covariance matrix block-wise and regularize it. A data-driven grouping of assets of similar trading frequency ensures the reduction of data loss due to refresh time sampling. In an extensive simulation study mimicking the empirical features of the S&P 1500 universe we show that the ’RnB’ estimator yields efficiency gains and outperforms competing kernel estimators for varying liquidity settings, noise-to-signal ratios, and dimensions. An empirical application of forecasting daily covariances of the S&P 500 index confirms the simulation results

Zigzag transitions and nonequilibrium pattern formation in colloidal chains

Paramagnetic colloidal particles that are optically trapped in a linear array can form a zigzag pattern when an external magnetic field induces repulsive interparticle interactions. When the traps are abruptly turned off, the particles form a nonequilibrium expanding pattern with a zigzag symmetry, even when the strength of the magnetic interaction is weaker than that required to break the linear symmetry of the equilibrium state. We show that the transition to the equilibrium zigzag state is always potentially possible for purely harmonic traps. For anharmonic traps that have a finite height, the equilibrium zigzag state becomes unstable above a critical anharmonicity. A normal mode analysis of the equilibrium line configuration demonstrates that increasing the magnetic field leads to a hardening and softening of the spring constants in the longitudinal and transverse directions, respectively. The mode that first becomes unstable is the mode with the zigzag symmetry, which explains the symmetry of nonequilibrium patterns. Our analytically tractable models help to give further insight into the way that the interplay of such factors as the length of the chain, hydrodynamic interactions, thermal fluctuations affect the formation and evolution of the experimentally observed nonequilibrium patterns.Comment: 16 pages, 8 figures; to appear in the Journal of Chemical Physic

Chemistry on quantum computers with virtual quantum subspace expansion

Several novel methods for performing calculations relevant to quantum chemistry on quantum computers have been proposed but not yet explored experimentally. Virtual quantum subspace expansion [T. Takeshita et al., Phys. Rev. X 10, 011004 (2020)] is one such algorithm developed for modeling complex molecules using their full orbital space and without the need for additional quantum resources. We implement this method on the IBM Q platform and calculate the potential energy curves of the hydrogen and lithium dimers using only two qubits and simple classical post-processing. A comparable level of accuracy would require twenty qubits with previous approaches. We also develop an approach to minimize the impact of experimental noise on the stability of a generalized eigenvalue problem that is a crucial component of the algorithm. Our results demonstrate that virtual quantum subspace expansion works well in practice

Pattern formation in colloidal explosions

We study the non-equilibrium pattern formation that emerges when magnetically repelling colloids, trapped by optical tweezers, are abruptly released, forming colloidal explosions. For multiple colloids in a single trap we observe a pattern of expanding concentric rings. For colloids individually trapped in a line, we observe explosions with a zigzag pattern that persists even when magnetic interactions are much weaker than those that break the linear symmetry in equilibrium. Theory and computer simulations quantitatively describe these phenomena both in and out of equilibrium. An analysis of the mode spectrum allows us to accurately quantify the non-harmonic nature of the optical traps. Colloidal explosions provide a new way to generate well-characterized non-equilibrium behaviour in colloidal systems.Comment: New restructured version (supplementary material goes into main text, no change of content), added journal reference and DOI information; 6 pages, 6 figures, published in Europhysics Letters (EPL

Endogenous Wnt signalling in human embryonic stem cells generates an equilibrium of distinct lineage-specified progenitors.

The pluripotent nature of human embryonic stem cells (hESCs) makes them convenient for deriving therapeutically relevant cells. Here we show using Wnt reporter hESC lines that the cells are heterogeneous with respect to endogenous Wnt signalling activity. Moreover, the level of Wnt signalling activity in individual cells correlates with differences in clonogenic potential and lineage-specific differentiation propensity. The addition of Wnt protein or, conversely, a small-molecule Wnt inhibitor (IWP2) reduces heterogeneity, allowing stable expansion of Wnt(high) or Wnt(low) hESC populations, respectively. On differentiation, the Wnt(high) hESCs predominantly form endodermal and cardiac cells, whereas the Wnt(low) hESCs generate primarily neuroectodermal cells. Thus, heterogeneity with respect to endogenous Wnt signalling underlies much of the inefficiency in directing hESCs towards specific cell types. The relatively uniform differentiation potential of the Wnt(high) and Wnt(low) hESCs leads to faster and more efficient derivation of targeted cell types from these populations