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On the intraday periodicity duration adjustment of high-frequency data

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  • Wu, Zhengxiao

Abstract

In the last decade, intensive studies on modeling high frequency financial data at the transaction level have been conducted. In the analysis of high-frequency duration data, it is often the first step to remove the intraday periodicity. Currently the most popular adjustment procedure is the cubic spline procedure proposed by Engle and Russell (1998). In this article, we first carry out a simulation study and show that the performance of the cubic spline procedure is not entirely satisfactory. Then we define periodicity point processes rigorously and prove a time change theorem. A new intraday periodic adjustment procedure is then proposed and its effectiveness is demonstrated in the simulation example. The new approach is easy to implement and well supported by the point process theory. It provides an attractive alternative to the cubic spline procedure.

Suggested Citation

  • Wu, Zhengxiao, 2012. "On the intraday periodicity duration adjustment of high-frequency data," Journal of Empirical Finance, Elsevier, vol. 19(2), pages 282-291.
  • Handle: RePEc:eee:empfin:v:19:y:2012:i:2:p:282-291
    DOI: 10.1016/j.jempfin.2011.12.004
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Liu, Shouwei & Tse, Yiu-Kuen, 2015. "Intraday Value-at-Risk: An asymmetric autoregressive conditional duration approach," Journal of Econometrics, Elsevier, vol. 189(2), pages 437-446.
    2. Tse, Yiu-Kuen & Dong, Yingjie, 2014. "Intraday periodicity adjustments of transaction duration and their effects on high-frequency volatility estimation," Journal of Empirical Finance, Elsevier, vol. 28(C), pages 352-361.

    More about this item

    Keywords

    Autoregressive conditional duration model; High-frequency data; Intraday periodicity; Nonstationary Poisson process; Point process;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
    • C53 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Forecasting and Prediction Models; Simulation Methods

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