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Wavelet-based methods for high-frequency lead-lag analysis

Takaki Hayashi and Yuta Koike

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Abstract: We propose a novel framework to investigate lead-lag relationships between two financial assets. Our framework bridges a gap between continuous-time modeling based on Brownian motion and the existing wavelet methods for lead-lag analysis based on discrete-time models and enables us to analyze the multi-scale structure of lead-lag effects. We also present a statistical methodology for the scale-by-scale analysis of lead-lag effects in the proposed framework and develop an asymptotic theory applicable to a situation including stochastic volatilities and irregular sampling. Finally, we report several numerical experiments to demonstrate how our framework works in practice.

New Economics Papers: this item is included in nep-ecm and nep-ets
Date: 2016-12, Revised 2018-11
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