2However, in practice, at very high frequencies, returns are polluted by microstructure noise (bid-ask bounce, unevenly spaced observations, discreteness,...). This “errors-in-variables” problem causes the high-frequency returns to be autocorrelated. Recall that bid-ask bounce occurs in all high-frequency transaction data as successive quotes tend to bounce between buys and sells, and sampling these as proxies for the mid-price gives an impression that markets are moving more than they actually are, adding an upward bias to the measured volatility.