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Trading strategies and the frequency of time-series

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  • Isaenko, Sergey

Abstract

We consider a linear model of stock returns derived from equilibrium analysis and study how trading strategy of a marginal investor affects the relation between estimates of the moments of stock returns and measuring frequency. Subject to the impact of the stock allocations of the marginal investor on the stock price, the rate of her trading to the optimal allocations and the amount of idiosyncratic risk, the estimates of the moments of stock returns may significantly change with measuring frequency. This change for the standard deviation of the conditional Sharpe ratio could be in tens of times stronger than for unconditional moments of stock returns.

Suggested Citation

  • Isaenko, Sergey, 2023. "Trading strategies and the frequency of time-series," The Quarterly Review of Economics and Finance, Elsevier, vol. 90(C), pages 267-283.
    • Handle: RePEc:eee:quaeco:v:90:y:2023:i:c:p:267-283
    DOI: 10.1016/j.qref.2022.10.006
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    References listed on IDEAS

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    More about this item

    Keywords

    Reversal; High frequency data; Estimates of stock return;
    All these keywords.

    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C18 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Methodolical Issues: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C83 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Survey Methods; Sampling Methods

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