Ané, T. and Geman, Hélyette (2000) Order flow, transaction clock and normality of asset returns. The Journal of Finance 55 (5), pp. 2259-2284. ISSN 0022-1082.
Abstract
The goal of this paper is to show that normality of asset returns can be recovered through a stochastic time change. Clark (1973) addressed this issue by representing the price process as a subordinated process with volume as the lognormally distributed subordinator. We extend Clark's results and find the following: (i) stochastic time changes are mathematically much less constraining than subordinators; (ii) the cumulative number of trades is a better stochastic clock than the volume for generating virtually perfect normality in returns; (iii) this clock can be modeled nonparametrically, allowing both the time‐change and price processes to take the form of jump diffusions.
Metadata
| Item Type: | Article |
|---|---|
| School: | Birkbeck Faculties and Schools > Faculty of Science > School of Computing and Mathematical Sciences |
| Depositing User: | Sarah Hall |
| Date Deposited: | 15 Jun 2020 14:32 |
| Last Modified: | 09 Aug 2023 12:48 |
| URI: | https://eprints.bbk.ac.uk/id/eprint/32263 |
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