The impact of an asynchronous transaction on the predictability of returns: case of the Korean market
DOI:
https://doi.org/10.59051/joaf.v5i1.24Keywords:
Return Predictability, Lead-lag effect, Emergent Market, Impulse-Response function, Granger-CausalityAbstract
This paper aims to study the impact of an asynchronous transaction on the predictability of the returns of two indices of different liquidities of the Korean market. We propose a new alternative that focuses on the study of the lead-Lag effecton the value of two indices of each market studied by adopting the methodology of Camilleri and Green [2004] on the Korean market. The results obtained show that the most liquid index leads (lead) the less liquid index especially in the case of high frequency data. The predictability of returns is attributed to an asynchronous transaction and not a delay in price adjustments to new information.
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References
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Camilleri, S. J. and Green, C. J. (2004) “An analysis of the impact of non-synchronous trading on predictability: Evidence from the National Stock Exchange, India”, SSRN G12, pp.1-50.
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Lo, A. and Mackinlay A. C. (1990a) “An Econometric Analysis of No synchronous Trading”, Journal of Econometrics, Vol. 45, pp. 181-211.
Lo, A. and Mackinlay A. C. (1990b) “When are contrarian profits due to stock market overreaction”, The Review of Financial Studies, Vol. 3, pp. 175-205.
Mills, T. C. and Jordnov. J. V. (2000) “Lead-lag patterns between small and large size portfolios in the London Stock Exchange”, Applied Financial Economics, Vol. 8, pp. 167-174.
Sâfvenblad, P. (1997) “Trading volume and autocorrelation: Empirical evidence from the Stockholm Stock Exchange”, Working Papers Series, Economics and Finance, pp.1-28.
Schotman, P. C. and Zalewska, A. (2006) “Non-Synchronous trading and testing for market integration in Central European emerging markets”, Journal of Empirical Finance, Vol. 13, pp. 462-494.
Camilleri, S. J. and Green, C. J. (2004) “An analysis of the impact of non-synchronous trading on predictability: Evidence from the National Stock Exchange, India”, SSRN G12, pp.1-50.
Cohen, K., Maier, S., Schwartz, R. and Whitcomb. D. (1979) “On the existence of serial correlation in an efficient securities market”, TIMS Studies in the Management Sciences, Vol.11, pp. 151-168.
Fisher, L. (1966) “Some new stock indexes”, Journal of Business, Vol.39, pp. 191-225.
Granger, C. W. J. (1969) “Investigating causal relations by econometric methods and cross spactral methods”, Econometrica, Vol. 37, pp. 424-438.
Lo, A. and Mackinlay A. C. (1990a) “An Econometric Analysis of No synchronous Trading”, Journal of Econometrics, Vol. 45, pp. 181-211.
Lo, A. and Mackinlay A. C. (1990b) “When are contrarian profits due to stock market overreaction”, The Review of Financial Studies, Vol. 3, pp. 175-205.
Mills, T. C. and Jordnov. J. V. (2000) “Lead-lag patterns between small and large size portfolios in the London Stock Exchange”, Applied Financial Economics, Vol. 8, pp. 167-174.
Sâfvenblad, P. (1997) “Trading volume and autocorrelation: Empirical evidence from the Stockholm Stock Exchange”, Working Papers Series, Economics and Finance, pp.1-28.
Schotman, P. C. and Zalewska, A. (2006) “Non-Synchronous trading and testing for market integration in Central European emerging markets”, Journal of Empirical Finance, Vol. 13, pp. 462-494.
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Published
2014-12-17
How to Cite
FATNASSI, latifa. (2014). The impact of an asynchronous transaction on the predictability of returns: case of the Korean market. Journal of Academic Finance, 5(1). https://doi.org/10.59051/joaf.v5i1.24
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