Constructing weekly returns based on daily stock market data: A puzzle for empirical research?

Eduard Baumohl and Štefan Lyócsa

MPRA Paper from University Library of Munich, Germany

Abstract: The weekly returns of equities are commonly used in the empirical research to avoid the non-synchronicity of daily data. An empirical analysis is used to show that the statistical properties of a weekly stock returns series strongly depend on the method used to construct this series. Three types of weekly returns construction are considered: (i) Wednesday-to-Wednesday, (ii) Friday-to-Friday, and (iii) averaging daily observations within the corresponding week. Considerable distinctions are found between these procedures using data from the S&P500 and DAX stock market indices. Differences occurred in the unit-root tests, identified volatility breaks, unconditional correlations, ARMA-GARCH and DCC MV-GARCH models as well. Our findings provide evidence that the method employed for constructing weekly stock returns can have a decisive effect on the outcomes of empirical studies.

Keywords: stock markets; weekly returns; statistical properties (search for similar items in EconPapers)
JEL-codes: C10 C80 G10 (search for similar items in EconPapers)
Date: 2012-12-26
New Economics Papers: this item is included in nep-ecm, nep-ets and nep-fmk
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Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:43431

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