AI & ML
Inference for Realized Quadratic Covariation of $R$ and $R^2$ as a Measure of Return Asymmetry
arXiv stat.TH0 views
arXiv:2611.06368v1 Announce Type: new Abstract: We propose a nonparametric test of return asymmetry based on the realized quadratic covariation between a cumulative return path and its square using high-frequency data. Our null hypothesis is that the volatility path is independent of the Brownian motion driving returns. Under this null and a martingale condition, the infill limit of the statistic is conditionally Gaussian given the volatility path, with a conditional variance determined by integrated variance. Studentization by a feasible variance estimator yields an asymptotically standard normal statistic without specifying a parametric model for volatility. Simulations under Heston and Bates dynamics show near-nominal per-window size, quantify power gains from independent-window aggregation, and assess sensitivity to jump removal and volatility-dependent drift. An application to 165 U.S. stocks over 1998--2025 finds that rejections concentrate in negative asymmetry, consistent with the leverage effect.
Source:https://arxiv.org/abs/2611.06368PreviousVariational Splines and Generalized Gaussian ProcessesNextOn Natural Exponential Families with Log-Affine Generalized Variance
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