On the origin of the Epps effect

Bence Tóth*, János Kertész

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract (may include machine translation)

The Epps effect, the decrease of correlations between stock returns for short time windows, was traced back to the trading asynchronicity and to the occasional lead-lag relation between the prices. We study pairs of stocks where the latter is negligible and confirm the importance of asynchronicity but point out that alone these aspects are insufficient to give account for the whole effect.

Original languageEnglish
Pages (from-to)54-58
Number of pages5
JournalPhysica A: Statistical Mechanics and its Applications
Volume383
Issue number1 SPEC. ISS.
DOIs
StatePublished - 1 Sep 2007
Externally publishedYes

Keywords

  • Epps effect
  • Financial correlations
  • High frequency data

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