Statistical inferences for price staleness

  • Asset transaction prices sampled at high frequency are much staler than one might expect in the sense that they frequently lack new updates showing zero returns. In this paper, we propose a theoretical framework for formalizing this phenomenon. It hinges on the existence of a latent continuous-time stochastic process pt valued in the open interval (0; 1), which represents at any point in time the probability of the occurrence of a zero return. Using a standard infill asymptotic design, we develop an inferential theory for nonparametrically testing, the null hypothesis that pt is constant over one day. Under the alternative, which encompasses a semimartingale model for pt, we develop non-parametric inferential theory for the probability of staleness that includes the estimation of various integrated functionals of pt and its quadratic variation. Using a large dataset of stocks, we provide empirical evidence that the null of the constant probability of staleness is fairly rejected. We then show that the variability of pt is mainly driven by transaction volume and is almost unaffected by bid-ask spread and realized volatility.

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Author:Aleksey Kolokolov, Giulia Livieri, Davide Pirino
Parent Title (English):SAFE working paper series ; No. 236
Series (Serial Number):SAFE working paper (236)
Place of publication:Frankfurt am Main
Document Type:Working Paper
Year of Completion:2018
Year of first Publication:2018
Publishing Institution:Universit├Ątsbibliothek Johann Christian Senckenberg
Release Date:2018/11/22
Tag:idle time; liquidity; stable convergence; staleness; zero returns
Issue:November 6, 2018
Page Number:60
Institutes:Wirtschaftswissenschaften / Wirtschaftswissenschaften
Wissenschaftliche Zentren und koordinierte Programme / House of Finance (HoF)
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Wissenschaftliche Zentren und koordinierte Programme / Sustainable Architecture for Finance in Europe (SAFE)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Licence (German):License LogoDeutsches Urheberrecht