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Order Flow, Transaction Clock, and Normality of Asset Returns: A Comment on Ané and Geman (2000)

Author

Listed:
  • Anthony Murphy

    (Nuffield College, Oxford)

  • Marwan Izzeldin

    (Lancaster University)

Abstract

We investigate the procedure used by Ané and Geman (2000) to recover the moments of information flow from high frequency data in a model which generalizes the subordinated / mixture of distributions process in Clark (1973). Using Monte Carlo experiments we show that the third and higher moments of the latent information flow cannot be accurately recovered using their univariate procedure. We explain why this happens. In our data, returns conditioned on the recentered number of trades are not Gaussian.

Suggested Citation

  • Anthony Murphy & Marwan Izzeldin, 2005. "Order Flow, Transaction Clock, and Normality of Asset Returns: A Comment on Ané and Geman (2000)," Finance 0512005, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpfi:0512005
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    References listed on IDEAS

    as
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    Cited by:

    1. Ata Türkoğlu, 2016. "Normally distributed high-frequency returns: a subordination approach," Quantitative Finance, Taylor & Francis Journals, vol. 16(3), pages 389-409, March.
    2. Torben G. Andersen & Tim Bollerslev & Per Frederiksen & Morten Ørregaard Nielsen, 2010. "Continuous-time models, realized volatilities, and testable distributional implications for daily stock returns," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 25(2), pages 233-261.

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    More about this item

    Keywords

    Subordinated process; Normality;

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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