An Econometric Analysis of Nonsynchronous Trading

39 Pages Posted: 28 Dec 2006 Last revised: 9 Aug 2010

See all articles by Andrew W. Lo

Andrew W. Lo

Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER); Massachusetts Institute of Technology (MIT) - Computer Science and Artificial Intelligence Laboratory (CSAIL)

A. Craig Mackinlay

University of Pennsylvania - Finance Department; National Bureau of Economic Research (NBER)

Date Written: May 1989

Abstract

We develop a stochastic model of nonsynchronous asset prices based on sampling with random censoring. In addition to generalizing existing models of non-trading our framework allows the explicit calculation of the effects of infrequent trading on the time series properties of asset returns. These are empirically testable implications for the variances, autocorrelations, and cross-autocorrelations of returns to individual stocks as well as to portfolios. We construct estimators to quantify the magnitude of non-trading effects in commonly used stock returns data bases and show the extent to which this phenomenon is responsible for the recent rejections of the random walk hypothesis.

Suggested Citation

Lo, Andrew W. and MacKinlay, Archie Craig, An Econometric Analysis of Nonsynchronous Trading (May 1989). NBER Working Paper No. w2960. Available at SSRN: https://ssrn.com/abstract=461392

Andrew W. Lo (Contact Author)

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

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Massachusetts Institute of Technology (MIT) - Computer Science and Artificial Intelligence Laboratory (CSAIL)

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Archie Craig MacKinlay

University of Pennsylvania - Finance Department ( email )

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National Bureau of Economic Research (NBER)

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