Related papers: The Epps effect under alternative sampling schemes
We analyse the dependence of stock return cross-correlations on the sampling frequency of the data known as the Epps effect: For high resolution data the cross-correlations are significantly smaller than their asymptotic value as observed…
In addressing the question of the time scales characteristic for the market formation, we analyze high frequency tick-by-tick data from the NYSE and from the German market. By using returns on various time scales ranging from seconds or…
A detailed analysis of correlation between stock returns at high frequency is compared with simple models of random walks. We focus in particular on the dependence of correlations on time scales - the so-called Epps effect. This provides a…
We present a method to compensate statistical errors in the calculation of correlations on asynchronous time series. The method is based on the assumption of an underlying time series. We set up a model and apply it to financial data to…
We review the decomposition method of stock return cross-correlations, presented previously for studying the dependence of the correlation coefficient on the resolution of data (Epps effect). Through a toy model of random walk/Brownian…
The cross correlation matrix between equities comprises multiple interactions between traders with varying strategies and time horizons. In this paper, we use the Maximum Overlap Discrete Wavelet Transform to calculate correlation matrices…
The Epps effect is key phenomenology relating to high frequency correlation dynamics in financial markets. We argue that it can be used to provide insight into whether tick data is best represented as samples from Brownian diffusions, or as…
We present two statistical causes for the distortion of correlations on high-frequency financial data. We demonstrate that the asynchrony of trades as well as the decimalization of stock prices has a large impact on the decline of the…
We revisit and demonstrate the Epps effect using two well-known non-parametric covariance estimators; the Malliavin and Mancino (MM), and Hayashi and Yoshida (HY) estimators. We show the existence of the Epps effect in the top 10 stocks…
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…
We use random walks to simulate the fluid limit of two coupled diffusive limit order books to model correlation emergence. The model implements the arrival, cancellation and diffusion of orders coupled by a pairs trader profiting from the…
We measure the influence of different time-scales on the dynamics of financial market data. This is obtained by decomposing financial time series into simple oscillations associated with distinct time-scales. We propose two new time-varying…
We use a new method of studying the Hurst exponent with time and scale dependency. This new approach allow us to recover the major events affecting worldwide markets (such as the September 11th terrorist attack) and analyze the way those…
This topic review communicates working experiences regarding interaction of a multiplicity of processes. Our experiences come from climate change modelling, materials science, cell physiology and public health, and macroeconomic modelling.…
We investigate financial market correlations using random matrix theory and principal component analysis. We use random matrix theory to demonstrate that correlation matrices of asset price changes contain structure that is incompatible…
In this brief review, we critically examine the recent work done on correlation-based networks in financial systems. The structure of empirical correlation matrices constructed from the financial market data changes as the individual stock…
It is a well-documented fact that the correlation function of the returns on two "related" assets is generally increasing as a function of the horizon $h$ of these returns. This phenomenon, termed the Epps Effect, holds true in a wide…
The correlation coefficient between stocks depends on price history and includes information on hierarchical structure in financial markets. It is useful for portfolio selection and estimation of risk. I introduce the Life Time of…
The definition of time is still an open question when one deals with high frequency time series. If time is simply the calendar time, prices can be modeled as continuous random processes and values resulting from transactions or given…
This thesis applies entropy as a model independent measure to address three research questions concerning financial time series. In the first study we apply transfer entropy to drawdowns and drawups in foreign exchange rates, to study their…