IDEAS home Printed from https://ideas.repec.org/p/arx/papers/1904.10182.html
   My bibliography  Save this paper

Copula estimation for nonsynchronous financial data

Author

Listed:
  • Arnab Chakrabarti
  • Rituparna Sen

Abstract

Copula is a powerful tool to model multivariate data. We propose the modelling of intraday financial returns of multiple assets through copula. The problem originates due to the asynchronous nature of intraday financial data. We propose a consistent estimator of the correlation coefficient in case of Elliptical copula and show that the plug-in copula estimator is uniformly convergent. For non-elliptical copulas, we capture the dependence through Kendall's Tau. We demonstrate underestimation of the copula parameter and use a quadratic model to propose an improved estimator. In simulations, the proposed estimator reduces the bias significantly for a general class of copulas. We apply the proposed methods to real data of several stock prices.

Suggested Citation

  • Arnab Chakrabarti & Rituparna Sen, 2019. "Copula estimation for nonsynchronous financial data," Papers 1904.10182, arXiv.org, revised Sep 2020.
    • Handle: RePEc:arx:papers:1904.10182
    as

    Download full text from publisher

    File URL: http://arxiv.org/pdf/1904.10182
    File Function: Latest version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Grossmass Lidan & Poon Ser-Huang, 2015. "Estimating dynamic copula dependence using intraday data," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 19(4), pages 501-529, September.
    2. Roberto Renò, 2003. "A Closer Look At The Epps Effect," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 6(01), pages 87-102.
    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. Takaki Hayashi & Yuta Koike, 2017. "No arbitrage and lead-lag relationships," Papers 1712.09854, arXiv.org.
    2. Anirban Chakraborti & Ioane Muni Toke & Marco Patriarca & Frederic Abergel, 2011. "Econophysics review: I. Empirical facts," Quantitative Finance, Taylor & Francis Journals, vol. 11(7), pages 991-1012.
    3. Ole E. Barndorff-Nielsen & Neil Shephard, 2005. "Variation, jumps, market frictions and high frequency data in financial econometrics," OFRC Working Papers Series 2005fe08, Oxford Financial Research Centre.
    4. Barndorff-Nielsen, Ole E. & Hansen, Peter Reinhard & Lunde, Asger & Shephard, Neil, 2011. "Multivariate realised kernels: Consistent positive semi-definite estimators of the covariation of equity prices with noise and non-synchronous trading," Journal of Econometrics, Elsevier, vol. 162(2), pages 149-169, June.
    5. Fulvio Corsi & Francesco Audrino, 2012. "Realized Covariance Tick-by-Tick in Presence of Rounded Time Stamps and General Microstructure Effects," Journal of Financial Econometrics, Oxford University Press, vol. 10(4), pages 591-616, September.
    6. Tobias Eckernkemper & Bastian Gribisch, 2021. "Intraday conditional value at risk: A periodic mixed‐frequency generalized autoregressive score approach," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 40(5), pages 883-910, August.
    7. Precup, O. V. & Iori, G., 2005. "Cross-correlation measures in the high-frequency domain," Working Papers 1439, Department of Economics, City University London.
    8. Jiang, Cuixia & Ding, Xiaoyi & Xu, Qifa & Tong, Yongbo, 2020. "A TVM-Copula-MIDAS-GARCH model with applications to VaR-based portfolio selection," The North American Journal of Economics and Finance, Elsevier, vol. 51(C).
    9. repec:cty:dpaper:10.1103/physreve.75.036110 is not listed on IDEAS
    10. 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.
    11. Patrick Chang, 2020. "Fourier instantaneous estimators and the Epps effect," Papers 2007.03453, arXiv.org, revised Sep 2020.
    12. Patrick Chang & Etienne Pienaar & Tim Gebbie, 2020. "The Epps effect under alternative sampling schemes," Papers 2011.11281, arXiv.org, revised Aug 2021.
    13. J'er^ome Busca & L'eon Thomir, 2023. "Epps Effect and the Signature of Short-Term Momentum Traders," Papers 2309.06711, arXiv.org.
    14. Iori, G. & Precup, O. V., 2006. "Weighted network analysis of high frequency cross-correlation measures," Working Papers 1453, Department of Economics, City University London.
    15. Anirban Chakraborti & Ioane Muni Toke & Marco Patriarca & Frederic Abergel, 2011. "Econophysics review: II. Agent-based models," Quantitative Finance, Taylor & Francis Journals, vol. 11(7), pages 1013-1041.
    16. Anirban Chakraborti & Ioane Muni Toke & Marco Patriarca & Frédéric Abergel, 2011. "Econophysics review: I. Empirical facts," Post-Print hal-00621058, HAL.
    17. Nicolas Huth & Frédéric Abergel, 2010. "High frequency correlation modelling," Post-Print hal-00621244, HAL.
    18. Lei Tan & Jun-Jie Chen & Bo Zheng & Fang-Yan Ouyang, 2016. "Exploring Market State and Stock Interactions on the Minute Timescale," PLOS ONE, Public Library of Science, vol. 11(2), pages 1-13, February.
    19. Giorgio Mirone, 2018. "Cross-sectional noise reduction and more efficient estimation of Integrated Variance," CREATES Research Papers 2018-18, Department of Economics and Business Economics, Aarhus University.
    20. repec:cty:dpaper:10.1080/13518470600813565 is not listed on IDEAS

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    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:arx:papers:1904.10182. 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: arXiv administrators (email available below). General contact details of provider: http://arxiv.org/ .

    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.