Econometrica: Mar, 2003, Volume 71, Issue 2

The Effects of Random and Discrete Sampling when Estimating Continuous–Time Diffusions

https://doi.org/10.1111/1468-0262.t01-1-00416
p. 483-549

Yacine Aït–Sahalia, Per A. Mykland

High–frequency financial data are not only discretely sampled in time but the time separating successive observations is often random. We analyze the consequences of this dual feature of the data when estimating a continuous–time model. In particular, we measure the additional effects of the randomness of the sampling intervals over and beyond those due to the discreteness of the data. We also examine the effect of simply ignoring the sampling randomness. We find that in many situations the randomness of the sampling has a larger impact than the discreteness of the data.