Nonparametric test for a constant beta between Itô semi-martingales based on high-frequency data

Markus Reiß, Viktor Todorov*, George Tauchen

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

12 Scopus citations

Abstract

We derive a nonparametric test for constant beta over a fixed time interval from high-frequency observations of a bivariate Itô semimartingale. Beta is defined as the ratio of the spot continuous covariation between an asset and a risk factor and the spot continuous variation of the latter. The test is based on the asymptotic behavior of the covariation between the risk factor and an estimate of the residual component of the asset, that is orthogonal (in martingale sense) to the risk factor, over blocks with asymptotically shrinking time span. Rate optimality of the test over smoothness classes is derived.

Original languageEnglish (US)
Pages (from-to)2955-2988
Number of pages34
JournalStochastic Processes and their Applications
Volume125
Issue number8
DOIs
StatePublished - Aug 1 2015

Keywords

  • High-frequency data
  • Nonparametric tests
  • Stochastic volatility
  • Time-varying beta

ASJC Scopus subject areas

  • Statistics and Probability
  • Modeling and Simulation
  • Applied Mathematics

Fingerprint Dive into the research topics of 'Nonparametric test for a constant beta between Itô semi-martingales based on high-frequency data'. Together they form a unique fingerprint.

Cite this