IDEAS home Printed from https://ideas.repec.org/a/agh/journl/v17y2016i1p57-75.html
   My bibliography  Save this article

The impact of asynchronous trading on Epps effect. Comparative study on Warsaw Stock Exchange and Vienna Stock Exchange

Author

Listed:
  • Henryk Gurgul

    (AGH University of Science and Technology, Department of Applications of Mathematics in Economics)

  • Artur Machno

    (AGH University of Science and Technology, Department of Applications of Mathematics in Economics)

Abstract

The novelty/value added of this paper is the comparison of the Epps effect between developed and emerging stock markets from Central Europe by means of the correction formula derived by the authors. The main goal of the study is to test whether or not asynchrony in transactiontimes is a considerable source of the Epps effect in the case of the Warsaw and Vienna stock exchanges for the most-liquid assets from these markets. Among all analyzed stock pairs on the WSE, asynchrony turns out to be the main cause of the Epps effect. However, the corrected correlation estimator seems to be more volatile than the regular estimator of the correlation. In the case of the VSE, evidence of the Epps effect is not unique. For the most-liquid and most-correlated pair (namely, ANDR-EBS), the analysis delivers similar results as for Polish stocks. However, the Epps effect could not be detected for the remaining pairs on the VSE. The presented analysis can be reproduced for the same data or replicated for another dataset; all R codes used in the computation within this paper are available upon request.

Suggested Citation

  • Henryk Gurgul & Artur Machno, 2016. "The impact of asynchronous trading on Epps effect. Comparative study on Warsaw Stock Exchange and Vienna Stock Exchange," Managerial Economics, AGH University of Science and Technology, Faculty of Management, vol. 17(1), pages 57-75.
    • Handle: RePEc:agh:journl:v:17:y:2016:i:1:p:57-75
    as

    Download full text from publisher

    File URL: https://journals.agh.edu.pl/manage/article/view/2108/1545
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. T. Conlon & H. J. Ruskin & M. Crane, 2009. "Multiscaled Cross-Correlation Dynamics In Financial Time-Series," Advances in Complex Systems (ACS), World Scientific Publishing Co. Pte. Ltd., vol. 12(04n05), pages 439-454.
    2. Conlon, T. & Ruskin, H.J. & Crane, M., 2009. "Cross-correlation dynamics in financial time series," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 388(5), pages 705-714.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Bommarito, Michael J. & Duran, Ahmet, 2018. "Spectral analysis of time-dependent market-adjusted return correlation matrix," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 503(C), pages 273-282.
    2. Jovanovic, Franck & Mantegna, Rosario N. & Schinckus, Christophe, 2019. "When financial economics influences physics: The role of Econophysics," International Review of Financial Analysis, Elsevier, vol. 65(C).
    3. Wang, Yan-Jun & Zhu, Yun-Feng & Zhu, Chen-Ping & Wu, Fan & Yang, Hui-Jie & Yan, Yong-Jie & Hu, Chin-Kun, 2019. "Indicator of serious flight delays with the approach of time-delay stability," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 518(C), pages 363-373.
    4. Ren, Yinghua & Zhao, Wanru & You, Wanhai & Zhai, Kaikai, 2021. "Multiscale and partial correlation networks analysis of risk connectedness in global equity markets," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 573(C).
    5. Ren, Yinghua & Zhao, Wanru & You, Wanhai & Zhu, Huiming, 2022. "Multiscale features of extreme risk spillover networks among global stock markets," The North American Journal of Economics and Finance, Elsevier, vol. 62(C).
    6. Henryk Gurgul & Artur Machno, 2017. "The impact of asynchronous trading on Epps effect on Warsaw Stock Exchange," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 25(2), pages 287-301, June.
    7. Shen, Keren & Yao, Jianfeng & Li, Wai Keung, 2019. "On a spiked model for large volatility matrix estimation from noisy high-frequency data," Computational Statistics & Data Analysis, Elsevier, vol. 131(C), pages 207-221.
    8. S. Valeyre & D. S. Grebenkov & S. Aboura, 2018. "Emergence of correlations between securities at short time scales," Papers 1807.05015, arXiv.org.
    9. Sebastien Valeyre & Denis S Grebenkov & Sofiane Aboura, 2019. "Emergence of correlations between securities at short time scales," Post-Print hal-02343888, HAL.
    10. Zhang, Yiting & Lee, Gladys Hui Ting & Wong, Jian Cheng & Kok, Jun Liang & Prusty, Manamohan & Cheong, Siew Ann, 2011. "Will the US economy recover in 2010? A minimal spanning tree study," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 390(11), pages 2020-2050.
    11. Nie, Chun-Xiao & Song, Fu-Tie, 2019. "Global Rényi index of the distance matrix," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 514(C), pages 902-915.
    12. Gang-Jin Wang & Chi Xie & Shou Chen, 2017. "Multiscale correlation networks analysis of the US stock market: a wavelet analysis," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 12(3), pages 561-594, October.
    13. Nie, Chun-Xiao, 2020. "Correlation dynamics in the cryptocurrency market based on dimensionality reduction analysis," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 554(C).
    14. Ajay Singh & Dinghai Xu, 2016. "Random matrix application to correlations amongst the volatility of assets," Quantitative Finance, Taylor & Francis Journals, vol. 16(1), pages 69-83, January.
    15. Liu, Li-Zhi & Qian, Xi-Yuan & Lu, Heng-Yao, 2010. "Cross-sample entropy of foreign exchange time series," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(21), pages 4785-4792.
    16. B. Goswami & G. Ambika & N. Marwan & J. Kurths, 2011. "On interrelations of recurrences and connectivity trends between stock indices," Papers 1103.5189, arXiv.org.
    17. Chun-Xiao Nie & Fu-Tie Song, 2021. "Entropy of Graphs in Financial Markets," Computational Economics, Springer;Society for Computational Economics, vol. 57(4), pages 1149-1166, April.
    18. Chun-Xiao Nie, 2021. "Studying the correlation structure based on market geometry," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 16(2), pages 411-441, April.
    19. Siqueira, Erinaldo Leite & Stošić, Tatijana & Bejan, Lucian & Stošić, Borko, 2010. "Correlations and cross-correlations in the Brazilian agrarian commodities and stocks," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(14), pages 2739-2743.
    20. Goswami, B. & Ambika, G. & Marwan, N. & Kurths, J., 2012. "On interrelations of recurrences and connectivity trends between stock indices," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 391(18), pages 4364-4376.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:agh:journl:v:17:y:2016:i:1:p:57-75. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Lukasz Lach (email available below). General contact details of provider: https://edirc.repec.org/data/wzaghpl.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.