On the origin of the Epps effect

Details On the origin of the Epps effect On the origin of the Epps effect

2007-01-09

arxiv.org/abs/physics/0701110v3

Physica A 383(1), 54-58 (2007)

Physics

Physics and Society

7 pages, 4 figures; to appear in the Proceedings of Econophysics Colloquium 2006 References added

Scientific paper

10.1016/j.physa.2007.04.111

The Epps effect, the decrease of correlations between stock returns for short time windows, was traced back to the trading asynchronicity and to the occasional lead-lag relation between the prices. We study pairs of stocks where the latter is negligible and confirm the importance of asynchronicity but point out that alone these aspects are insufficient to give account for the whole effect.

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