Testing the Markov Property with Ultra-High Frequency Financial Data
Autor(a) principal: | |
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Data de Publicação: | 2004 |
Outros Autores: | |
Tipo de documento: | Artigo |
Idioma: | eng |
Título da fonte: | Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
Texto Completo: | http://hdl.handle.net/10362/83205 |
Resumo: | This paper develops a framework to nonparametrically test whether discretevalued irregularly-spaced financial transactions data follow a 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. 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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Testing the Markov Property with Ultra-High Frequency Financial DataBid-ask spreadNonparametric testingPrice durationsMarkov propertyUltra-high frequency dataThis paper develops a framework to nonparametrically test whether discretevalued irregularly-spaced financial transactions data follow a 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. 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.Nova SBERUNAmaro de Matos, JoãoFernandes, Marcelo2019-10-04T13:26:29Z20042004-01-01T00:00:00Zinfo:eu-repo/semantics/publishedVersioninfo:eu-repo/semantics/articleapplication/pdfhttp://hdl.handle.net/10362/83205engAmaro de Matos, João and Fernandes, Marcelo, Testing the Markov Property with Ultra-High Frequency Financial Data (2004). FEUNL Working Paper Series No. 462info:eu-repo/semantics/openAccessreponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãoinstacron:RCAAP2024-03-11T04:37:07Zoai:run.unl.pt:10362/83205Portal AgregadorONGhttps://www.rcaap.pt/oai/openaireopendoar:71602024-03-20T03:36:18.082657Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informaçãofalse |
dc.title.none.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 Amaro de Matos, João Bid-ask spread Nonparametric testing Price durations Markov property Ultra-high frequency data |
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 |
Amaro de Matos, João |
author_facet |
Amaro de Matos, João Fernandes, Marcelo |
author_role |
author |
author2 |
Fernandes, Marcelo |
author2_role |
author |
dc.contributor.none.fl_str_mv |
RUN |
dc.contributor.author.fl_str_mv |
Amaro de Matos, João Fernandes, Marcelo |
dc.subject.por.fl_str_mv |
Bid-ask spread Nonparametric testing Price durations Markov property Ultra-high frequency data |
topic |
Bid-ask spread Nonparametric testing Price durations Markov property Ultra-high frequency data |
description |
This paper develops a framework to nonparametrically test whether discretevalued irregularly-spaced financial transactions data follow a 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. 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 |
2004 |
dc.date.none.fl_str_mv |
2004 2004-01-01T00:00:00Z 2019-10-04T13:26:29Z |
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/10362/83205 |
url |
http://hdl.handle.net/10362/83205 |
dc.language.iso.fl_str_mv |
eng |
language |
eng |
dc.relation.none.fl_str_mv |
Amaro de Matos, João and Fernandes, Marcelo, Testing the Markov Property with Ultra-High Frequency Financial Data (2004). FEUNL Working Paper Series No. 462 |
dc.rights.driver.fl_str_mv |
info:eu-repo/semantics/openAccess |
eu_rights_str_mv |
openAccess |
dc.format.none.fl_str_mv |
application/pdf |
dc.publisher.none.fl_str_mv |
Nova SBE |
publisher.none.fl_str_mv |
Nova SBE |
dc.source.none.fl_str_mv |
reponame:Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) instname:Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação instacron:RCAAP |
instname_str |
Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
instacron_str |
RCAAP |
institution |
RCAAP |
reponame_str |
Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
collection |
Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) |
repository.name.fl_str_mv |
Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos) - Agência para a Sociedade do Conhecimento (UMIC) - FCT - Sociedade da Informação |
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1799137981864345600 |