Variances of Security Price Returns Based on High, Low, and Closing Prices

In a recent paper, Garman and Klass (1980) studied the problem of estimating capital asset price volatility parameters. Developing an idea first introduced by Parkinson (1980), they argue that improved volatility measures can be obtained by taking into account the daily high, low, and opening prices in addition to the traditionally used closing prices. This paper is concerned mainly with testing the empirical validity of different volatility estimators based on high, low, and closing prices.