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An Analysis of the Impacts of Non-Synchronous Trading On

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Author Info

  • Silvio John Camilleri

    (Banking & Finance Dept. - University of Malta)

  • Christopher J. Green

    (Economics Dept., - Loughborough University)

Abstract

The serial correlation effects which non-synchronous trading can induce in financial data have been documented by various researchers. In this paper we investigate non-synchronous trading effects in terms of the predictability that may be induced in the values of stock indices. This analysis is applied to emerging-market data, on the grounds that such markets might be less liquid and thus prone to a higher degree of non- synchronous trading. We use both a daily data set and a higher frequency one, since the latter is a prerequisite for capturing intra-day variations in trading activity. When considering one-minute interval data, we obtain clear evidence of predictability between indices with different degrees of non-synchronous trading. We then propose a simple test to infer whether such predictability is mainly attributable to non- synchronous trading or an actual delayed adjustment on part of traders. The results obtained from an intra-day analysis suggest that the former cause seems a better explanation for the observed predictability. Future research in this area is needed to shed light on the degree of data predictability which may be exclusively attributed to non-synchronous trading, and how empirical results may be influenced by the chosen data frequency.

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File URL: http://128.118.178.162/eps/fin/papers/0504/0504020.pdf
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Bibliographic Info

Paper provided by EconWPA in its series Finance with number 0504020.

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Length: 50 pages
Date of creation: 27 Apr 2005
Date of revision:
Handle: RePEc:wpa:wuwpfi:0504020

Note: Type of Document - pdf; pages: 50
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Web page: http://128.118.178.162

Related research

Keywords: Non-Synchronous Trading; Stock Markets; National Stock Exchange of India; High-Frequency Data.;

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References

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  1. Kadlec, Gregory B & Patterson, Douglas M, 1999. "A Transactions Data Analysis of Nonsynchronous Trading," Review of Financial Studies, Society for Financial Studies, vol. 12(3), pages 609-30.
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Cited by:
  1. Silvio John Camilleri, 2005. "Can a Stock Index be Less Efficient than Underlying Shares? An Analysis Using Malta Stock Exchange Data," Finance 0507006, EconWPA.
  2. repec:asi:joabsj:2012:p:238-249 is not listed on IDEAS

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