Noise and efficient variance in the Indonesia Stock Exchange

Thomas Henker and Zaäfri A. Husodo

Pacific-Basin Finance Journal, 2010, vol. 18, issue 2, 199-216

Abstract: We separate noise from information related variance for stocks traded on the Indonesian Stock Exchange with a realized variance estimator. We find that the average optimal sampling frequency to estimate the realized variance is 9Â min and that market quality has improved after 2004. The positive relation between the standard deviation of the noise variance and the square root of the efficient realized variance implies that as uncertainty about asset values increases the risk of transacting with traders with superior information increases as well. Furthermore, variance ratio comparisons reveal that private information is a significant trading component on the IDX.

Keywords: Realized; variance; Optimal; sampling; frequency; Noise; Efficient; variance (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:18:y:2010:i:2:p:199-216

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