Normally distributed high-frequency returns: a subordination approach

Ata Türkoğlu

Quantitative Finance, 2016, vol. 16, issue 3, 389-409

Abstract: In this paper, market microstructure models are considered to assess the influence of the key components that drive asset prices. Synchronization techniques and sampling methods are reviewed. Alternatives to normally distributed asset returns, specifically subordinated Brownian motion, are considered. The influential components of the price processes are then combined under tick time to recover normality of asset returns via subordination, a process I denote as ‘natural time’. Normally distributed returns are obtained with the natural time approach which is also found to dominate GARCH results.

Date: 2016
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DOI: 10.1080/14697688.2015.1023335

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