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SOE: Fachverband Physik sozio-ökonomischer Systeme

SOE 21: Economic Models and Evolutionary Game Theory II

SOE 21.3: Vortrag

Donnerstag, 29. März 2012, 16:00–16:15, H 0110

Universality in time-lagged return correlations - a generalization of the Epps effect — •Jürgen Stockburger and Daniel Jaschke — Institut für Theoretische Physik, Universität Ulm

Statistical correlations of asset returns are essential parameters of portfolio theory. However, correlation coefficients generally decrease considerably when very short return intervals are considered [1,2,3]. The dual constraints of a large enough return interval and a maximum time interval compatible with the assumption of stationarity therefore appear to pose a fundamental constraint on the accuracy of empirically determined correlations. Here we propose to circumvent this constraint by including time-lagged correlations of short-time returns in the analysis, allowing the consideration of arbitrarily small time intervals as well as tuning the analysis for the specific time horizon of an investment decision. Extensions of the procedure at ultrashort times due to a transition from classical, correlation-based analysis to microstructure-based strategies are discussed.
[1] Epps, T. W., J. Am. Statist. Assoc., 74, 291 (1979)
[2] Tóth, B. and Kertész, J., Quant. Fin. Routledge, 9, 793 (2009)
[3] Münnix, M. C., Schäfer, R. and Guhr, T., arXiv:1009.6157