Observed high-frequency financial prices can be considered as having two components, a true price and a market microstructure noise perturbation. It is an empirical regularity, coherent with classical market microstructure theories of price determination, that the second moment of market...

A growing literature advocates the use of microstructure noise-contaminated high-frequency data for the purpose of volatility estimation. This paper evaluates and compares the quality of several recently-proposed estimators in the context of a relevant economic metric, i.e., profits from...