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An Analysis of the Impacts of Non-Synchronous Trading On

  • Silvio John Camilleri

    (Banking & Finance Dept. - University of Malta)

  • Christopher J. Green

    (Economics Dept., - Loughborough University)

The 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.

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File URL: http://econwpa.repec.org/eps/fin/papers/0504/0504020.pdf
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Paper provided by EconWPA in its series Finance with number 0504020.

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Length: 50 pages
Date of creation: 27 Apr 2005
Date of revision:
Handle: RePEc:wpa:wuwpfi:0504020
Note: Type of Document - pdf; pages: 50
Contact details of provider: Web page: http://econwpa.repec.org

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  1. 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.
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