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    Order flow, transaction clock and normality of asset returns

    Ané, T. and Geman, Helyette (2000) Order flow, transaction clock and normality of asset returns. The Journal of Finance 55 (5), pp. 2259-2284. ISSN 0022-1082.

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    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: School of Business, Economics & Informatics > Computer Science and Information Systems
    Depositing User: Sarah Hall
    Date Deposited: 15 Jun 2020 14:32
    Last Modified: 15 Jun 2020 14:32
    URI: https://eprints.bbk.ac.uk/id/eprint/32263

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