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The Estimation of Quality-Adjusted Auction Returns with Varying Transaction Intervals

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  • Taylor, William M.

Abstract

Previous research has separately addressed the problem of estimating risk in the presence of infrequent trading and the problem of estimating quality-adjusted returns in markets with quality variation in the observed price series. This paper simultaneously addresses both problems by applying a signal extraction method for unequally spaced data to decompose the observed price series with varying times between transactions into a quality-adjusted, permanent component (which would be observable in the absence of quality variation) plus a stationary, transitory quality variation component. Stamp auction transaction prices provide an application. Auction quality grading is treated in a manner analogous to bond ratings. Almost all of the observed variance is attributed to the auction quality variation. The observed auction returns and stock index returns are not well related.

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  • Taylor, William M., 1992. "The Estimation of Quality-Adjusted Auction Returns with Varying Transaction Intervals," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 27(1), pages 131-142, March.
    • Handle: RePEc:cup:jfinqa:v:27:y:1992:i:01:p:131-142_00
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    Cited by:

    1. Gregory Connor & Lisa R. Goldberg & Robert A. Korajczyk, 2010. "Portfolio Risk Analysis," Economics Books, Princeton University Press, edition 1, number 9224.
    2. Kenneth Wieand & Jeff Donaldson & Socorro Quintero, 1998. "Are Real Assets Priced Internationally? Evidence from the Art Market," Multinational Finance Journal, Multinational Finance Journal, vol. 2(3), pages 167-187, September.
    3. William Goetzmann, 1998. "The Effect of Seller Reserves on Market Index Estimation," Yale School of Management Working Papers ysm61, Yale School of Management, revised 01 Aug 2000.
    4. William Goetzmann, 1998. "The Effect of Seller Reserves on Market Index Estimation," Yale School of Management Working Papers ysm61, Yale School of Management, revised 01 Aug 2000.

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