Review of Financial Studies Vol. 12 No. 3 1999
A transactions data analysis of nonsynchronous trading
Abstract
Weekly returns of stock portfolios exhibit substantial autocorrelation. Analytical studies suggest that nonsynchronous trading is capable of explaining from 5% to 65% of the autocorrelation. The varying importance of nonsynchronous trading in these studies arises primarily from differing assumptions regarding nontrading periods of stocks. We simulate the effects of nonsynchronous trading by sampling stock returns from a return generating process using transactions data to obtain the precise time of each stock's last trade. We find that simulated weekly portfolio returns exhibit autocorrelations that are roughly 25% that of their observed (CRSP) weekly returns.
- DOI
- 10.1093/rfs/12.3.609
- Volume
- 12
- Issue
- 3
- Pages
- 609-630
- Sources
- openalex crossref