Testing the Markov property with ultra high frequency financial data
Autor(a) principal: | |
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Data de Publicação: | 2001 |
Outros Autores: | |
Tipo de documento: | Artigo |
Idioma: | eng |
Título da fonte: | Repositório Institucional do FGV (FGV Repositório Digital) |
Texto Completo: | http://hdl.handle.net/10438/780 |
Resumo: | This paper develops a framework to test whether discrete-valued irregularly-spaced financial transactions data follow a subordinated Markov process. For that purpose, we consider a specific optional sampling in which a continuous-time Markov process is observed only when it crosses some discrete level. This framework is convenient for it accommodates not only the irregular spacing of transactions data, but also price discreteness. Further, it turns out that, under such an observation rule, the current price duration is independent of previous price durations given the current price realization. A simple nonparametric test then follows by examining whether this conditional independence property holds. Finally, we investigate whether or not bid-ask spreads follow Markov processes using transactions data from the New York Stock Exchange. The motivation lies on the fact that asymmetric information models of market microstructures predict that the Markov property does not hold for the bid-ask spread. The results are mixed in the sense that the Markov assumption is rejected for three out of the five stocks we have analyzed. |
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Matos, João Manuel Gonçalves Amaro deFernandes, MarceloEscolas::EPGEFGV2008-05-13T15:34:02Z2010-09-23T18:58:32Z2008-05-13T15:34:02Z2010-09-23T18:58:32Z2001-03-010104-8910http://hdl.handle.net/10438/780This paper develops a framework to test whether discrete-valued irregularly-spaced financial transactions data follow a subordinated Markov process. For that purpose, we consider a specific optional sampling in which a continuous-time Markov process is observed only when it crosses some discrete level. This framework is convenient for it accommodates not only the irregular spacing of transactions data, but also price discreteness. Further, it turns out that, under such an observation rule, the current price duration is independent of previous price durations given the current price realization. A simple nonparametric test then follows by examining whether this conditional independence property holds. Finally, we investigate whether or not bid-ask spreads follow Markov processes using transactions data from the New York Stock Exchange. The motivation lies on the fact that asymmetric information models of market microstructures predict that the Markov property does not hold for the bid-ask spread. The results are mixed in the sense that the Markov assumption is rejected for three out of the five stocks we have analyzed.engFundação Getulio VargasEnsaios Econômicos;414Bid-ask spreadNonparametric testsPrice durationsSubordinated Markov processUltra-high frequency dataEconomiaEconomiaMarkov, Processos deProcesso estocásticoTesting the Markov property with ultra high frequency financial datainfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/articlereponame:Repositório Institucional do FGV (FGV Repositório Digital)instname:Fundação Getulio Vargas (FGV)instacron:FGVinfo:eu-repo/semantics/openAccessTHUMBNAIL1263.pdf.jpg1263.pdf.jpgGenerated Thumbnailimage/jpeg4321https://repositorio.fgv.br/bitstreams/ca2a08a3-8a16-496c-b3fb-76c15e1248a4/downloadb281594e99de953d1410b3ec5a5d95feMD58ORIGINAL1263.pdfapplication/pdf273243https://repositorio.fgv.br/bitstreams/64dd753a-19b2-4598-9a86-e734a96d20eb/downloade066f4195407ddd77a61a6e8170f72dbMD52TEXT1263.pdf.txt1263.pdf.txtExtracted texttext/plain28434https://repositorio.fgv.br/bitstreams/0b3012f2-d6bc-476f-99e1-7c9670d304fe/downloadfe009c4c94512481e415c575d25c65c9MD5710438/7802023-11-09 22:24:44.336open.accessoai:repositorio.fgv.br:10438/780https://repositorio.fgv.brRepositório InstitucionalPRIhttp://bibliotecadigital.fgv.br/dspace-oai/requestopendoar:39742023-11-09T22:24:44Repositório Institucional do FGV (FGV Repositório Digital) - Fundação Getulio Vargas (FGV)false |
dc.title.eng.fl_str_mv |
Testing the Markov property with ultra high frequency financial data |
title |
Testing the Markov property with ultra high frequency financial data |
spellingShingle |
Testing the Markov property with ultra high frequency financial data Matos, João Manuel Gonçalves Amaro de Bid-ask spread Nonparametric tests Price durations Subordinated Markov process Ultra-high frequency data Economia Economia Markov, Processos de Processo estocástico |
title_short |
Testing the Markov property with ultra high frequency financial data |
title_full |
Testing the Markov property with ultra high frequency financial data |
title_fullStr |
Testing the Markov property with ultra high frequency financial data |
title_full_unstemmed |
Testing the Markov property with ultra high frequency financial data |
title_sort |
Testing the Markov property with ultra high frequency financial data |
author |
Matos, João Manuel Gonçalves Amaro de |
author_facet |
Matos, João Manuel Gonçalves Amaro de Fernandes, Marcelo |
author_role |
author |
author2 |
Fernandes, Marcelo |
author2_role |
author |
dc.contributor.unidadefgv.por.fl_str_mv |
Escolas::EPGE |
dc.contributor.affiliation.none.fl_str_mv |
FGV |
dc.contributor.author.fl_str_mv |
Matos, João Manuel Gonçalves Amaro de Fernandes, Marcelo |
dc.subject.eng.fl_str_mv |
Bid-ask spread Nonparametric tests Price durations Subordinated Markov process Ultra-high frequency data |
topic |
Bid-ask spread Nonparametric tests Price durations Subordinated Markov process Ultra-high frequency data Economia Economia Markov, Processos de Processo estocástico |
dc.subject.area.por.fl_str_mv |
Economia |
dc.subject.bibliodata.por.fl_str_mv |
Economia Markov, Processos de Processo estocástico |
description |
This paper develops a framework to test whether discrete-valued irregularly-spaced financial transactions data follow a subordinated Markov process. For that purpose, we consider a specific optional sampling in which a continuous-time Markov process is observed only when it crosses some discrete level. This framework is convenient for it accommodates not only the irregular spacing of transactions data, but also price discreteness. Further, it turns out that, under such an observation rule, the current price duration is independent of previous price durations given the current price realization. A simple nonparametric test then follows by examining whether this conditional independence property holds. Finally, we investigate whether or not bid-ask spreads follow Markov processes using transactions data from the New York Stock Exchange. The motivation lies on the fact that asymmetric information models of market microstructures predict that the Markov property does not hold for the bid-ask spread. The results are mixed in the sense that the Markov assumption is rejected for three out of the five stocks we have analyzed. |
publishDate |
2001 |
dc.date.issued.fl_str_mv |
2001-03-01 |
dc.date.accessioned.fl_str_mv |
2008-05-13T15:34:02Z 2010-09-23T18:58:32Z |
dc.date.available.fl_str_mv |
2008-05-13T15:34:02Z 2010-09-23T18:58:32Z |
dc.type.status.fl_str_mv |
info:eu-repo/semantics/publishedVersion |
dc.type.driver.fl_str_mv |
info:eu-repo/semantics/article |
format |
article |
status_str |
publishedVersion |
dc.identifier.uri.fl_str_mv |
http://hdl.handle.net/10438/780 |
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0104-8910 |
identifier_str_mv |
0104-8910 |
url |
http://hdl.handle.net/10438/780 |
dc.language.iso.fl_str_mv |
eng |
language |
eng |
dc.relation.ispartofseries.por.fl_str_mv |
Ensaios Econômicos;414 |
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info:eu-repo/semantics/openAccess |
eu_rights_str_mv |
openAccess |
dc.publisher.none.fl_str_mv |
Fundação Getulio Vargas |
publisher.none.fl_str_mv |
Fundação Getulio Vargas |
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