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Financial correlations at ultra-high frequency: theoretical models and empirical estimation

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  • I. Mastromatteo
  • M. Marsili
  • P. Zoi

Abstract

A detailed analysis of correlation between stock returns at high frequency is compared with simple models of random walks. We focus in particular on the dependence of correlations on time scales – the so-called Epps effect. This provides a characterization of stochastic models of stock price returns which is appropriate at very high frequency. Copyright EDP Sciences, SIF, Springer-Verlag Berlin Heidelberg 2011

Suggested Citation

  • I. Mastromatteo & M. Marsili & P. Zoi, 2011. "Financial correlations at ultra-high frequency: theoretical models and empirical estimation," The European Physical Journal B: Condensed Matter and Complex Systems, Springer;EDP Sciences, vol. 80(2), pages 243-253, March.
    • Handle: RePEc:spr:eurphb:v:80:y:2011:i:2:p:243-253
    DOI: 10.1140/epjb/e2011-10865-y
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    References listed on IDEAS

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    1. Bouchaud,Jean-Philippe & Potters,Marc, 2003. "Theory of Financial Risk and Derivative Pricing," Cambridge Books, Cambridge University Press, number 9780521819169.
    2. Gençay, Ramazan & Dacorogna, Michel & Muller, Ulrich A. & Pictet, Olivier & Olsen, Richard, 2001. "An Introduction to High-Frequency Finance," Elsevier Monographs, Elsevier, edition 1, number 9780122796715.
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    Cited by:

    1. Patrick Chang & Etienne Pienaar & Tim Gebbie, 2020. "Using the Epps effect to detect discrete processes," Papers 2005.10568, arXiv.org, revised Oct 2021.
    2. Patrick Chang & Roger Bukuru & Tim Gebbie, 2019. "Revisiting the Epps effect using volume time averaging: An exercise in R," Papers 1912.02416, arXiv.org, revised Feb 2020.
    3. Chang, Patrick & Pienaar, Etienne & Gebbie, Tim, 2021. "The Epps effect under alternative sampling schemes," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 583(C).
    4. Andre Cardoso Barato & Iacopo Mastromatteo & Marco Bardoscia & Matteo Marsili, 2011. "Impact of meta-order in the Minority Game," Papers 1112.3908, arXiv.org, revised Nov 2012.
    5. Patrick Chang, 2020. "Fourier instantaneous estimators and the Epps effect," Papers 2007.03453, arXiv.org, revised Sep 2020.
    6. Patrick Chang & Etienne Pienaar & Tim Gebbie, 2020. "The Epps effect under alternative sampling schemes," Papers 2011.11281, arXiv.org, revised Aug 2021.
    7. Anufriev, Mikhail & Bottazzi, Giulio & Marsili, Matteo & Pin, Paolo, 2012. "Excess covariance and dynamic instability in a multi-asset model," Journal of Economic Dynamics and Control, Elsevier, vol. 36(8), pages 1142-1161.
    8. 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.

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