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A Transactions Data Analysis of Nonsynchronous Trading

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Author Info
Kadlec, Gregory B
Patterson, Douglas M
Abstract

Weekly returns of stock portfolios exhibit substantial autocorrelation. Analytical studies suggest that nonsynchronous trading is capable of explaining from 5% to 65% of the autocorrelation. The varying importance of nonsynchronous trading in these studies arises primarily from differing assumptions regarding nontrading periods of stocks. We simulate the effects of nonsynchronous trading by sampling stock returns from a return generating process using transactions data to obtain the precise time of each stock's last trade. We find that simulated weekly portfolio returns exhibit autocorrelations that are roughly 25% that of their observed (CRSP) weekly returns. Article published by Oxford University Press on behalf of the Society for Financial Studies in its journal, The Review of Financial Studies.

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Publisher Info
Article provided by Oxford University Press for Society for Financial Studies in its journal Review of Financial Studies.

Volume (Year): 12 (1999)
Issue (Month): 3 ()
Pages: 609-30
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:oup:rfinst:v:12:y:1999:i:3:p:609-30

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