Order Flow, Transaction Clock, and Normality of Asset Returns

Thierry Ané and Hélyette Geman

Journal of Finance, 2000, vol. 55, issue 5, 2259-2284

Abstract: The goal of this paper is to show that normality of asset returns can be recovered through a stochastic time change. Clark (1973) addressed this issue by representing the price process as a subordinated process with volume as the lognormally distributed subordinator. We extend Clark's results and find the following: (i) stochastic time changes are mathematically much less constraining than subordinators; (ii) the cumulative number of trades is a better stochastic clock than the volume for generating virtually perfect normality in returns; (iii) this clock can be modeled nonparametrically, allowing both the time‐change and price processes to take the form of jump diffusions.

Date: 2000
References: Add references at CitEc
Citations: View citations in EconPapers (74)

Downloads: (external link)
https://doi.org/10.1111/0022-1082.00286

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jfinan:v:55:y:2000:i:5:p:2259-2284

Ordering information: This journal article can be ordered from
http://www.afajof.org/membership/join.asp

Access Statistics for this article

More articles in Journal of Finance from American Finance Association Contact information at EDIRC.
Bibliographic data for series maintained by Wiley Content Delivery ().