This paper gives an unbiased estimator of the variance of overlapping returns. The estimator improves upon that proposed in Lo and MacKinlay (1988) [LM] (which is widely used in practice), as the LM estimator is consistent but not unbiased in small samples. The relevance of unbiasedness for variance ratio tests in a simulation experiment is illustrated.

analysis of variance, rate of return, unbiased estimators,
ERIM Article Series (EAS)
Applied Financial Economics
Erasmus Research Institute of Management

Franses, Ph.H.B.F, Bod, P, Blitz, D.C, & Kluitman, R. (2002). An unbiased variance estimator for overlapping returns. Applied Financial Economics, 155–158. doi:10.1080/09603100110090127