Journal of Financial Economics Vol. 15 No. 3 1986
Non-trading, market making, and estimates of stock price volatility
open access
Abstract
We examine the effects of market making and intermittent trading on estimates of stock price volatility. When observed price changes are correctly tied to a stock's true price dynamics, it is found that non-trading per se causes a loss of efficiency but no bias in traditional volatility estimates. Non-trading induces substancial inefficiency in the extreme value estimator of volatility which it biases downward. Market making's effects add to the non-trading induced inefficiency in the traditional estimator, while information trading causes a downward bias, and liquidity trading a potentially removable upward bias, in that estimator.
- DOI
- 10.1016/0304-405x(86)90026-7
- Volume
- 15
- Issue
- 3
- Pages
- 359-372
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref