An Analysis of the Impacts of Non-Synchronous Trading On

Silvio Camilleri () and Christopher Green

Finance from University Library of Munich, Germany

Abstract: The serial correlation effects which non-synchronous trading can induce in financial data have been documented by various researchers. In this paper we investigate non-synchronous trading effects in terms of the predictability that may be induced in the values of stock indices. This analysis is applied to emerging-market data, on the grounds that such markets might be less liquid and thus prone to a higher degree of non- synchronous trading. We use both a daily data set and a higher frequency one, since the latter is a prerequisite for capturing intra-day variations in trading activity. When considering one-minute interval data, we obtain clear evidence of predictability between indices with different degrees of non-synchronous trading. We then propose a simple test to infer whether such predictability is mainly attributable to non- synchronous trading or an actual delayed adjustment on part of traders. The results obtained from an intra-day analysis suggest that the former cause seems a better explanation for the observed predictability. Future research in this area is needed to shed light on the degree of data predictability which may be exclusively attributed to non-synchronous trading, and how empirical results may be influenced by the chosen data frequency.

Keywords: Non-Synchronous Trading; Stock Markets; National Stock Exchange of India; High-Frequency Data. (search for similar items in EconPapers)
JEL-codes: G12 G14 (search for similar items in EconPapers)
Pages: 50 pages
Date: 2005-04-27
New Economics Papers: this item is included in nep-fin and nep-rmg
Note: Type of Document - pdf; pages: 50
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:wpa:wuwpfi:0504020

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