MCFAM Seminar Series: “Realized variance polluted by bid-ask spreads: Direct versus indirect corrections"
Please join us for our next seminar of fall semester either in person or virtually! This seminar will feature Dale Rosenthal from Parametric who will discuss realized variance polluted by bid-ask spreads.
Noon-1 p.m.
Vincent Hall, Room 211
Zoom meeting link
Note: Refreshments will be served to those who attend in person in Vincent Hall.
Dave Rosenthal
Director of Derivatives Research
Parametric, a Morgan Stanley company
About the lecture
The realized variance and high-frequency data literature has developed methods to correct for "microstructure noise." That noise is often thought to be due to bid-ask bounce. Using a variety of estimators for spreads and variance, Rosenthal shows that researchers can use these methods to also infer spreads. However, that reveals that the bias corrections (and thus the variance estimators themselves) are not what researchers think they are. This raises questions of what spreads and corrections researchers really want, what these methods are really estimating, and how they handle the endogeneity of trading.
About the speaker
Dale Rosenthal is a director of derivatives research at Parametric, a Morgan Stanley company. He was previously a quantitative Eurodollars trader and consultant at his own firm, Q36. Before that, he was an assistant professor at the University of Illinois Chicago, University of Illinois Urbana-Champaign, and University of Notre Dame. He interned at Goldman Sachs, worked for five years as an equity derivatives strategist at Long-Term Capital Management, and was a quantitative researcher and proprietary algorithmic trader at Morgan Stanley's Equity Trading Lab. His academic research focuses on trading and financial distress using market microstructure and financial econometrics.
Rosenthal's work has been published in the Journal of Financial Econometrics and the Journal of Empirical Finance. Since 2009, he has co-organized the R/Finance conference on using R for financial data analysis. He has appeared on TV and radio, been quoted in newspapers, and testified before the Illinois state legislature House Committee on Pension Investments. He has presented policy-relevant work at the European Central Bank, Banque de France, Austrian National Bank, National Bank of Slovakia, Bank of Finland, Reserve Bank of New Zealand, Federal Deposit Insurance Corporation (FDIC), and Commodity Futures Trading Commission (CFTC). Rosenthal graduated from Cornell University with a B.S. in electrical engineering and the University of Chicago with a Ph.D. in statistics.