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Overreaction and Multiple Tail Dependence at the High-frequency Level — The Copula Rose

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  • Wing Lon Ng

Abstract

This paper applies a non- and a semiparametric copula-based approach to analyze the first-order autocorrelation of returns in high frequency financial time series. Using the EUREX D3047 tick data from the German stock index, it can be shown that the temporal dependence structure of price movements is not always negatively correlated as assumed in the stylized facts in the finance literature. Depending on the sampling frequency, the estimated copulas exhibit some kind of overreaction phenomena and multiple tail dependence, revealing patterns similar to the compass rose.

Suggested Citation

  • Wing Lon Ng, 2006. "Overreaction and Multiple Tail Dependence at the High-frequency Level — The Copula Rose," SFB 649 Discussion Papers SFB649DP2006-086, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
    • Handle: RePEc:hum:wpaper:sfb649dp2006-086
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    References listed on IDEAS

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    More about this item

    Keywords

    High Frequency Data; Non- and Semiparametric Copulas; Overreaction; Tail Dependence; Compass Rose;
    All these keywords.

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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