Advanced Search
MyIDEAS: Login to save this paper or follow this series

High frequency analysis of lead-lag relationships between financial markets

Contents:

Author Info

  • Nijman, T.E.

    (Tilburg University)

  • Jong, F.C.J.M. de

    (Tilburg University)

Abstract

High frequency data are often observed at irregular intervals, which complicates the analysis of lead-lag relationships between financial markets. Frequently, estimators have been used that are based on observations at regular intervals, which are adapted to the irregular observations case by ignoring some observations and imputing others. In this paper we propose an estimator that avoids imputation and uses all available transactions to calculate (cross) covariances. This creates the possibility to analyze lead-lag relationships at arbitrarily high frequencies without additional imputation bias, as long as weak identifiability conditions are satisfied. We also provide an empirical application to the lead-lag relationship between the SP500 index and futures written on it.

(This abstract was borrowed from another version of this item.)

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://arno.uvt.nl/show.cgi?fid=26821
Our checks indicate that this address may not be valid because: 404 Not Found. If this is indeed the case, please notify (Economists Online Support)
Download Restriction: no

Bibliographic Info

Paper provided by Tilburg University in its series Open Access publications from Tilburg University with number urn:nbn:nl:ui:12-74206.

as in new window
Length:
Date of creation: 1997
Date of revision:
Publication status: Published in Journal of Empirical Finance (1997) v.4, p.259-277
Handle: RePEc:ner:tilbur:urn:nbn:nl:ui:12-74206

Contact details of provider:
Web page: http://www.tilburguniversity.edu/

Related research

Keywords:

Other versions of this item:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, Econometric Society, vol. 48(4), pages 817-38, May.
  2. Lo, Andrew W & MacKinlay, A Craig, 1990. "When Are Contrarian Profits Due to Stock Market Overreaction?," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 3(2), pages 175-205.
  3. Andrew W. Lo & Craig A. MacKinlay, . "An Econometric Analysis of Nonsyschronous-Trading," Rodney L. White Center for Financial Research Working Papers, Wharton School Rodney L. White Center for Financial Research 19-89, Wharton School Rodney L. White Center for Financial Research.
  4. Glosten, Lawrence R. & Milgrom, Paul R., 1985. "Bid, ask and transaction prices in a specialist market with heterogeneously informed traders," Journal of Financial Economics, Elsevier, Elsevier, vol. 14(1), pages 71-100, March.
  5. Grunbichler Andreas & Longstaff Francis A. & Schwartz Eduardo S., 1994. "Electronic Screen Trading and the Transmission of Information: An Empirical Examination," Journal of Financial Intermediation, Elsevier, Elsevier, vol. 3(2), pages 166-187, March.
  6. Eric Ghysels & Christian Gouriéroux & Joanna Jasiak, 1995. "Market Time and Asset Price Movements Theory and Estimation," CIRANO Working Papers, CIRANO 95s-32, CIRANO.
  7. Stoll, Hans R. & Whaley, Robert E., 1990. "The Dynamics of Stock Index and Stock Index Futures Returns," Journal of Financial and Quantitative Analysis, Cambridge University Press, Cambridge University Press, vol. 25(04), pages 441-468, December.
  8. Richardson, Matthew & Smith, Tom, 1991. "Tests of Financial Models in the Presence of Overlapping Observations," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 4(2), pages 227-54.
  9. Harris, Lawrence & Sofianos, George & Shapiro, James E, 1994. "Program Trading and Intraday Volatility," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 7(4), pages 653-85.
  10. Chan, Kalok & Chung, Y Peter & Johnson, Herb, 1993. " Why Option Prices Lag Stock Prices: A Trading-Based Explanation," Journal of Finance, American Finance Association, American Finance Association, vol. 48(5), pages 1957-67, December.
  11. French, Kenneth R. & Roll, Richard, 1986. "Stock return variances : The arrival of information and the reaction of traders," Journal of Financial Economics, Elsevier, Elsevier, vol. 17(1), pages 5-26, September.
  12. Hasbrouck, Joel, 1995. " One Security, Many Markets: Determining the Contributions to Price Discovery," Journal of Finance, American Finance Association, American Finance Association, vol. 50(4), pages 1175-99, September.
  13. Cohen, Kalman J. & Hawawini, Gabriel A. & Maier, Steven F. & Schwartz, Robert A. & Whitcomb, David K., 1983. "Friction in the trading process and the estimation of systematic risk," Journal of Financial Economics, Elsevier, Elsevier, vol. 12(2), pages 263-278, August.
  14. Stephan, Jens A & Whaley, Robert E, 1990. " Intraday Price Change and Trading Volume Relations in the Stock and Stock Option Markets," Journal of Finance, American Finance Association, American Finance Association, vol. 45(1), pages 191-220, March.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Ángel Pardo & Francisco Climent, 2000. "Relaciones temporales entre el contrato de futuro sobre IBEX-35 y su activo subyacente," Investigaciones Economicas, Fundación SEPI, Fundación SEPI, vol. 24(1), pages 219-236, January.
  2. repec:dgr:uvatin:2005089 is not listed on IDEAS
  3. de Jong, Frank & Mahieu, Ronald J & Schotman, Peter C, 1999. "Price Discovery on Foreign Exchange Markets," CEPR Discussion Papers, C.E.P.R. Discussion Papers 2296, C.E.P.R. Discussion Papers.
  4. Eric Renault & Khalid Sekkat & Ariane Szafarz, 1998. "Testing for Spurious Causality in Exchange Rates," ULB Institutional Repository 2013/709, ULB -- Universite Libre de Bruxelles.
  5. Corsi, Fulvio & Peluso, Stefano & Audrino, Francesco, 2012. "Missing in Asynchronicity: A Kalman-EM Approach for Multivariate Realized Covariance Estimation," Economics Working Paper Series 1202, University of St. Gallen, School of Economics and Political Science.
  6. Kim, Jun Sik & Ryu, Doojin, 2014. "Intraday price dynamics in spot and derivatives markets," Physica A: Statistical Mechanics and its Applications, Elsevier, Elsevier, vol. 394(C), pages 247-253.
  7. Christensen, Kim & Kinnebrock, Silja & Podolskij, Mark, 2010. "Pre-averaging estimators of the ex-post covariance matrix in noisy diffusion models with non-synchronous data," Journal of Econometrics, Elsevier, Elsevier, vol. 159(1), pages 116-133, November.
  8. Bruce Mizrach & Christopher J. Neely, 2007. "Information shares in the U.S. treasury market," Working Papers, Federal Reserve Bank of St. Louis 2005-070, Federal Reserve Bank of St. Louis.
  9. Michiel de Pooter & Martin Martens & Dick van Dijk, 2005. "Predicting the Daily Covariance Matrix for S&P 100 Stocks Using Intraday Data - But Which Frequency to Use?," Tinbergen Institute Discussion Papers, Tinbergen Institute 05-089/4, Tinbergen Institute, revised 03 Jan 2006.
  10. Robert, Christian Y. & Rosenbaum, Mathieu, 2010. "On the limiting spectral distribution of the covariance matrices of time-lagged processes," Journal of Multivariate Analysis, Elsevier, Elsevier, vol. 101(10), pages 2434-2451, November.
  11. Precup, Ovidiu V. & Iori, Giulia, 2004. "A comparison of high-frequency cross-correlation measures," Physica A: Statistical Mechanics and its Applications, Elsevier, Elsevier, vol. 344(1), pages 252-256.
  12. Sandoval, Leonidas, 2014. "To lag or not to lag? How to compare indices of stock markets that operate on different times," Physica A: Statistical Mechanics and its Applications, Elsevier, Elsevier, vol. 403(C), pages 227-243.
  13. S. Sanfelici & M. E. Mancino, 2008. "Covariance estimation via Fourier method in the presence of asynchronous trading and microstructure noise," Economics Department Working Papers 2008-ME01, Department of Economics, Parma University (Italy).
  14. Karyn L. Williams, 2000. "Price Discovery in Multiple-Dealer Markets: The Case of the Interbank Foreign Exchange Market," Claremont Colleges Working Papers, Claremont Colleges 2000-37, Claremont Colleges.
  15. Christian Upper & Thomas Werner, 2002. "How resilient are financial markets to stress? Bund futures and bonds during the 1998 turbulence," BIS Papers chapters, Bank for International Settlements, in: Bank for International Settlements (ed.), Market functioning and central bank policy, volume 12, pages 110-123 Bank for International Settlements.
  16. Andersson, Jonas, 2007. "On the estimation of correlations for irregularly spaced time series," Discussion Papers, Department of Business and Management Science, Norwegian School of Economics 2007/19, Department of Business and Management Science, Norwegian School of Economics.
  17. deB. Harris, Frederick H. & McInish, Thomas H. & Wood, Robert A., 2002. "Security price adjustment across exchanges: an investigation of common factor components for Dow stocks," Journal of Financial Markets, Elsevier, Elsevier, vol. 5(3), pages 277-308, July.
  18. Yi-Tsung Lee & Wei-Shao Wu & Yun Yang, 2013. "Informed Futures Trading and Price Discovery: Evidence from Taiwan Futures and Stock Markets," Asia-Pacific Financial Markets, Springer, Springer, vol. 20(3), pages 219-242, September.
  19. Ellul, Andrew, 2006. "Ripples through markets: Inter-market impacts generated by large trades," Journal of Financial Economics, Elsevier, Elsevier, vol. 82(1), pages 173-196, October.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ner:tilbur:urn:nbn:nl:ui:12-74206. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Economists Online Support).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.