On the origin of the Epps effect

Bence Tóth; János Kertész

doi:10.1016/j.physa.2007.04.111

On the origin of the Epps effect

Bence Tóth^*
, János Kertész

^*Corresponding author for this work

Institute for Scientific Interchange Foundation
Budapest University of Technology and Economics
Aalto University

Research output: Contribution to journal › Article › peer-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 language	English
Pages (from-to)	54-58
Number of pages	5
Journal	Physica A: Statistical Mechanics and its Applications
Volume	383
Issue number	1 SPEC. ISS.
DOIs	https://doi.org/10.1016/j.physa.2007.04.111
State	Published - 1 Sep 2007
Externally published	Yes

Keywords

Epps effect
Financial correlations
High frequency data

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10.1016/j.physa.2007.04.111

Cite this

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title = "On the origin of the Epps effect",

abstract = "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.",

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AB - 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.

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KW - Financial correlations

KW - High frequency data

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M3 - Article

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IS - 1 SPEC. ISS.

ER -

On the origin of the Epps effect

Abstract (may include machine translation)

Keywords

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