The effects of nonsynchronous trading in the Brazilian capital market

Detalhes bibliográficos
Autor(a) principal: Beteto, Danilo Lopomo
Data de Publicação: 2007
Outros Autores: Bergmann, Daniel Reed
Tipo de documento: Artigo
Idioma: eng
por
Título da fonte: BBR. Brazilian Business Review (English edition. Online)
Texto Completo: http://www.bbronline.com.br/index.php/bbr/article/view/421
Resumo: Market microstructure analysis is currently one of the most intense areas of study in economics and finance. One of the aspects addressed is the securities trading mechanism, to discover the effects of the idiosyncrasies observed in each market. Based on the model developed by Lo and McKinlay (1990), we show that the nontrading process creates a spurious correlation in the observed rates of return, causing a false idea of predictability. To approximate it to reality, we extend the model to a first-order, two-state Markov chain, deriving the moments of the process under this new hypothesis. We also demonstrate that the beta is biased if corrective measures are not taken, due to nonsynchronous data. Finally, using a high-frequency data sample from the Brazilian market, we empirically analyze the model and obtain the probabilities of trading the securities in equilibrium.
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spelling The effects of nonsynchronous trading in the Brazilian capital marketAnálise dos efeitos de não-sincronia de negociação no mercado de capitais brasileiroMarkov chainnonsynchronous effectpredictabilitycadeia de Markovefeito de não-sicronia e previsibilidadeMarket microstructure analysis is currently one of the most intense areas of study in economics and finance. One of the aspects addressed is the securities trading mechanism, to discover the effects of the idiosyncrasies observed in each market. Based on the model developed by Lo and McKinlay (1990), we show that the nontrading process creates a spurious correlation in the observed rates of return, causing a false idea of predictability. To approximate it to reality, we extend the model to a first-order, two-state Markov chain, deriving the moments of the process under this new hypothesis. We also demonstrate that the beta is biased if corrective measures are not taken, due to nonsynchronous data. Finally, using a high-frequency data sample from the Brazilian market, we empirically analyze the model and obtain the probabilities of trading the securities in equilibrium.Atualmente, a análise e o estudo da microestrutura de mercado é uma das áreas de pesquisa mais intensa em economia e finanças. Um dos aspectos abordados é o mecanismo de negociação dos ativos, tratando-se dos impactos das idiossincrasias observadas em cada mercado. A partir do modelo desenvolvido por Lo e McKinlay (1990), demonstra-se que o processo de não-negociação faz com que haja correlação espúria nas taxas observadas dos retornos, causando uma falsa idéia de previsibilidade. De modo a aproximar o modelo da realidade financeira, estende-se o mesmo para uma Cadeia de Markov de alcance 1 com 2 estados, derivando-se os momentos do processo sob esta nova hipótese. Ainda, demonstra-se que o beta é viesado caso não sejam adotadas as medidas corretivas devidas ao não-sincronismo dos dados. Finalmente, a partir de uma amostra de dados de alta freqüência do mercado brasileiro, analisa-se empiricamente o modelo e extraem-se as probabilidades de negociação dos ativos no estado de equilíbrio.FUCAPE Business Shool2007-01-01info:eu-repo/semantics/articleinfo:eu-repo/semantics/publishedVersionPeer-reviewed ArticleArtigo revisado pelos paresapplication/pdfapplication/pdfhttp://www.bbronline.com.br/index.php/bbr/article/view/42110.15728/bbr.2007.4.1.2Brazilian Business Review; Vol. 4 No. 1 (2007): January to April 2007; 28-41Brazilian Business Review; v. 4 n. 1 (2007): Janeiro a Abril de 2007; 28-411808-23861807-734Xreponame:BBR. Brazilian Business Review (English edition. Online)instname:Fucape Business School (FBS)instacron:FBSengporhttp://www.bbronline.com.br/index.php/bbr/article/view/421/642http://www.bbronline.com.br/index.php/bbr/article/view/421/643Copyright (c) 2007 Brazilian Business Reviewhttps://creativecommons.org/licenses/by/4.0info:eu-repo/semantics/openAccessBeteto, Danilo LopomoBergmann, Daniel Reed2018-11-06T19:59:58Zoai:ojs.pkp.sfu.ca:article/421Revistahttps://www.bbronline.com.br/index.php/bbr/indexONGhttp://www.bbronline.com.br/index.php/bbr/oai|| bbronline@bbronline.com.br1808-23861808-2386opendoar:2018-11-06T19:59:58BBR. Brazilian Business Review (English edition. Online) - Fucape Business School (FBS)false
dc.title.none.fl_str_mv The effects of nonsynchronous trading in the Brazilian capital market
Análise dos efeitos de não-sincronia de negociação no mercado de capitais brasileiro
title The effects of nonsynchronous trading in the Brazilian capital market
spellingShingle The effects of nonsynchronous trading in the Brazilian capital market
Beteto, Danilo Lopomo
Markov chain
nonsynchronous effect
predictability
cadeia de Markov
efeito de não-sicronia e previsibilidade
title_short The effects of nonsynchronous trading in the Brazilian capital market
title_full The effects of nonsynchronous trading in the Brazilian capital market
title_fullStr The effects of nonsynchronous trading in the Brazilian capital market
title_full_unstemmed The effects of nonsynchronous trading in the Brazilian capital market
title_sort The effects of nonsynchronous trading in the Brazilian capital market
author Beteto, Danilo Lopomo
author_facet Beteto, Danilo Lopomo
Bergmann, Daniel Reed
author_role author
author2 Bergmann, Daniel Reed
author2_role author
dc.contributor.author.fl_str_mv Beteto, Danilo Lopomo
Bergmann, Daniel Reed
dc.subject.por.fl_str_mv Markov chain
nonsynchronous effect
predictability
cadeia de Markov
efeito de não-sicronia e previsibilidade
topic Markov chain
nonsynchronous effect
predictability
cadeia de Markov
efeito de não-sicronia e previsibilidade
description Market microstructure analysis is currently one of the most intense areas of study in economics and finance. One of the aspects addressed is the securities trading mechanism, to discover the effects of the idiosyncrasies observed in each market. Based on the model developed by Lo and McKinlay (1990), we show that the nontrading process creates a spurious correlation in the observed rates of return, causing a false idea of predictability. To approximate it to reality, we extend the model to a first-order, two-state Markov chain, deriving the moments of the process under this new hypothesis. We also demonstrate that the beta is biased if corrective measures are not taken, due to nonsynchronous data. Finally, using a high-frequency data sample from the Brazilian market, we empirically analyze the model and obtain the probabilities of trading the securities in equilibrium.
publishDate 2007
dc.date.none.fl_str_mv 2007-01-01
dc.type.driver.fl_str_mv info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
Peer-reviewed Article
Artigo revisado pelos pares
format article
status_str publishedVersion
dc.identifier.uri.fl_str_mv http://www.bbronline.com.br/index.php/bbr/article/view/421
10.15728/bbr.2007.4.1.2
url http://www.bbronline.com.br/index.php/bbr/article/view/421
identifier_str_mv 10.15728/bbr.2007.4.1.2
dc.language.iso.fl_str_mv eng
por
language eng
por
dc.relation.none.fl_str_mv http://www.bbronline.com.br/index.php/bbr/article/view/421/642
http://www.bbronline.com.br/index.php/bbr/article/view/421/643
dc.rights.driver.fl_str_mv Copyright (c) 2007 Brazilian Business Review
https://creativecommons.org/licenses/by/4.0
info:eu-repo/semantics/openAccess
rights_invalid_str_mv Copyright (c) 2007 Brazilian Business Review
https://creativecommons.org/licenses/by/4.0
eu_rights_str_mv openAccess
dc.format.none.fl_str_mv application/pdf
application/pdf
dc.publisher.none.fl_str_mv FUCAPE Business Shool
publisher.none.fl_str_mv FUCAPE Business Shool
dc.source.none.fl_str_mv Brazilian Business Review; Vol. 4 No. 1 (2007): January to April 2007; 28-41
Brazilian Business Review; v. 4 n. 1 (2007): Janeiro a Abril de 2007; 28-41
1808-2386
1807-734X
reponame:BBR. Brazilian Business Review (English edition. Online)
instname:Fucape Business School (FBS)
instacron:FBS
instname_str Fucape Business School (FBS)
instacron_str FBS
institution FBS
reponame_str BBR. Brazilian Business Review (English edition. Online)
collection BBR. Brazilian Business Review (English edition. Online)
repository.name.fl_str_mv BBR. Brazilian Business Review (English edition. Online) - Fucape Business School (FBS)
repository.mail.fl_str_mv || bbronline@bbronline.com.br
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