Intraday Speed of Price Adjustment in the Jakarta Stock Exchange

35 Pages Posted: 10 Sep 2007

See all articles by Zaäfri A. Husodo

Zaäfri A. Husodo

Universitas Indonesia, Graduate School of Management

Thomas Henker

Bond University

Date Written: August 29, 2007

Abstract

High frequency study at individual level in the Jakarta Stock Exchange is conducted in this research to reveal the dynamics at intraday level. Several apparent patterns emerge from analyzing the relation among the speed of adjustment coefficients, noise, and noise variance. It is found that the noise and noise variance are at a low level when the speed of adjustment coefficients achieves a fair level. The speed of adjustment coefficients, both at market and individual level show a periodic adjustment pattern at a daily interval. This justifies the importance of studying the dynamics of the price discovery as estimated in the speed of adjustment coefficient. Another important finding is that there is a positive relationship between the uncertainty of asset fundamental values and the corresponding bid-ask spreads. This reflects higher uncertainty about the fundamental value of the asset increases the risk of transacting with traders with superior information.

Keywords: Speed of adjustment, price discovery, noise, intraday pattern, the jakarta stock exchange

JEL Classification: C22, D82, G14, G15

Suggested Citation

Husodo, Zaäfri A. and Henker, Thomas, Intraday Speed of Price Adjustment in the Jakarta Stock Exchange (August 29, 2007). 20th Australasian Finance & Banking Conference 2007 Paper. Available at SSRN: https://ssrn.com/abstract=1010498 or http://dx.doi.org/10.2139/ssrn.1010498

Zaäfri A. Husodo (Contact Author)

Universitas Indonesia, Graduate School of Management ( email )

Depok, West Java 16424
Indonesia

Thomas Henker

Bond University ( email )

Gold Coast, QLD 4229
Australia
+61 7 5595-1561 (Phone)

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