Abstract
This note considers the small sample bias of the empirical variances of observed and ex-post-rational prices of financial assets, and shows that this can be much more severe than has previously been thought.
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Research supported by Deutsche Forschungsgemeinschaft (DFG) and Ministerium für Wissenschaft und Forschung, NRW. I am grateful to Michael Schmidt, Jack Wahl, Wolfgang Bühler and an anonymous referee for helpful suggestions and comments.