An Analysis of the Impacts of Non-Synchronous Trading On
AbstractThe 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.
Download InfoIf 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.
Bibliographic InfoPaper provided by EconWPA in its series Finance with number 0504020.
Length: 50 pages
Date of creation: 27 Apr 2005
Date of revision:
Note: Type of Document - pdf; pages: 50
Contact details of provider:
Web page: http://188.8.131.52
Non-Synchronous Trading; Stock Markets; National Stock Exchange of India; High-Frequency Data.;
Find related papers by JEL classification:
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-04-30 (All new papers)
- NEP-FIN-2005-04-30 (Finance)
- NEP-RMG-2005-04-30 (Risk Management)
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.:
- 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.
- Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
- Eric Renault & Khalid Sekkat & Ariane Szafarz, 1998.
"Testing for Spurious Causality in Exchange Rates,"
ULB Institutional Repository
2013/709, ULB -- Universite Libre de Bruxelles.
- Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January.
- Boudoukh, Jacob & Richardson, Matthew P & Whitelaw, Robert F, 1994. "A Tale of Three Schools: Insights on Autocorrelations of Short-Horizon Stock Returns," Review of Financial Studies, Society for Financial Studies, vol. 7(3), pages 539-73.
- Gary Gang Tian & Guang Hua Wan, 2004. "Interaction among China-related stocks: evidence from a causality test with a new procedure," Applied Financial Economics, Taylor & Francis Journals, vol. 14(1), pages 67-72.
- Atchison, Michael D & Butler, Kirt C & Simonds, Richard R, 1987. " Nonsynchronous Security Trading and Market Index Autocorrelation," Journal of Finance, American Finance Association, vol. 42(1), pages 111-18, March.
- Theodore Panagiotidis, 2005. "Market capitalization and efficiency. Does it matter? Evidence from the Athens Stock Exchange," Applied Financial Economics, Taylor & Francis Journals, vol. 15(10), pages 707-713.
- Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-38, July.
- Pesaran, M.H. & Timmermann, A., 1990.
"A Simple, Non-Parametric Test Of Predictive Performance,"
Cambridge Working Papers in Economics
9021, Faculty of Economics, University of Cambridge.
- Pesaran, M Hashem & Timmermann, Allan, 1992. "A Simple Nonparametric Test of Predictive Performance," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(4), pages 561-65, October.
- Pesaran, M.H. & Timmermann, A., 1990. "A Simple Non-Parametric Test Of Predictive Performance," Papers 29, California Los Angeles - Applied Econometrics.
- Taufiq Choudhry, 2000. "Day of the week effect in emerging Asian stock markets: evidence from the GARCH model," Applied Financial Economics, Taylor & Francis Journals, vol. 10(3), pages 235-242.
- Koop, Gary & Pesaran, M. Hashem & Potter, Simon M., 1996. "Impulse response analysis in nonlinear multivariate models," Journal of Econometrics, Elsevier, vol. 74(1), pages 119-147, September.
- Bekaert, Geert & Harvey, Campbell R., 2002. "Research in emerging markets finance: looking to the future," Emerging Markets Review, Elsevier, vol. 3(4), pages 429-448, December.
- George Papachristou, 1999. "Stochastic behaviour of the Athens Stock Exchange: a case of institutional nonsynchronous trading," Applied Financial Economics, Taylor & Francis Journals, vol. 9(3), pages 239-250.
- Lo, Andrew W & MacKinlay, A Craig, 1990.
"When Are Contrarian Profits Due to Stock Market Overreaction?,"
Review of Financial Studies,
Society for Financial Studies, vol. 3(2), pages 175-205.
- Lo, Andrew W. (Andrew Wen-Chuan) & MacKinlay, Archie Craig, 1955-., 1989. "When are contrarian profits due to stock market overreaction?," Working papers 3008-89., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Andrew W. Lo & A. Craig MacKinlay, 1989. "When are Contrarian Profits Due to Stock Market Overreaction?," NBER Working Papers 2977, National Bureau of Economic Research, Inc.
- Hiemstra, Craig & Jones, Jonathan D, 1994. " Testing for Linear and Nonlinear Granger Causality in the Stock Price-Volume Relation," Journal of Finance, American Finance Association, vol. 49(5), pages 1639-64, December.
- Scholes, Myron & Williams, Joseph, 1977. "Estimating betas from nonsynchronous data," Journal of Financial Economics, Elsevier, vol. 5(3), pages 309-327, December.
- Nikitas Niarchos & Christos Alexakis, 1998. "Stock market prices, 'causality' and efficiency: evidence from the Athens stock exchange," Applied Financial Economics, Taylor & Francis Journals, vol. 8(2), pages 167-174.
- Wood, Robert A & McInish, Thomas H & Ord, J Keith, 1985. " An Investigation of Transactions Data for NYSE Stocks," Journal of Finance, American Finance Association, vol. 40(3), pages 723-39, July.
- Silvio John Camilleri, 2005. "Can a Stock Index be Less Efficient than Underlying Shares? An Analysis Using Malta Stock Exchange Data," Finance 0507006, EconWPA.
- repec:asi:joabsj:2012:p:238-249 is not listed on IDEAS
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (EconWPA).
If references are entirely missing, you can add them using this form.