On the origin of the Epps effect
arXiv:physics/0701110 · doi:10.1016/j.physa.2007.04.111
Abstract
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.
7 pages, 4 figures; to appear in the Proceedings of Econophysics Colloquium 2006 References added