Bias in the Mean Reversion Estimator in Continuous-Time Gaussian and Levy Processes

This paper develops the approximate nite-sample bias of the ordinary least squares or quasi maximum likelihood estimator of the mean reversion parameter in continuous-time Levy processes. For the special case of Gaussian processes, our results reduce to those of Tang and Chen (2009) (when the long-run mean is unknown) and Yu (2012) (when the long-run mean is known). Simulations show that in general the approximate bias works well in capturing the true bias of the mean reversion estimator under dierence scenarios. However, when the time span is small and the mean reversion parameter is approaching its lower bound, we nd it more dicult to approximate well the nite-sample bias.