Improving the Parkinson method of estimating security price volatilities.

I shall propose a new method for estimating the volatility parameters of security prices, which is an improvement of the estimation method by Parkinson (1980). I assume that the security prices follow the geometric Brownian motion. However, contrary to the setting of Parkinson (1980), the geometric Brownian motion may have nonzero drift terms. I show that the efficiency of my estimator is about 10 in comparison with the standard sample variance estimator. Since the efficiency of the estimator by Parkinson (1980) is about 4.91, my estimation method may considerably improve the estimation methods already known in financial economics. [ABSTRACT FROM AUTHOR]

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