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The Analytic Relationship between Intervaling and Nontrading Effects in Continuous Time

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  • Theobald, Michael

Abstract

Empirical studies in finance generally use data defined over the shortest return period available. Originally, data bases such as CRSP, tended to have data collected over monthly periods and most analyses tended to use monthly data rather than data compounded over periods greater than a month with the implicit argument that the more data the “better”. Since the development of data bases with data collected over shorter differencing intervals, there has been a growing tendency in finance to use returns data defined over increasingly shorter differencing intervals. This development is desirable, but is not without problems. The problem with using data defined over shorter differencing intervals is that, although greater estimating efficiency will be achieved, nontrading effects could be introduced into the analysis. These will lead to biased beta estimators and biases in tests of capital market efficiency. The purpose of this paper is to investigate, analytically, the interrelation of the intervaling and nontrading effects both in estimating beta factors and in testing capital market efficiency.

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  • Theobald, Michael, 1983. "The Analytic Relationship between Intervaling and Nontrading Effects in Continuous Time," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 18(2), pages 199-209, June.
    • Handle: RePEc:cup:jfinqa:v:18:y:1983:i:02:p:199-209_01
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    Cited by:

    1. Balasingham Balachandran & John Cadle & Michael Theobald, 1996. "Interim dividend cuts and omissions in the UK," European Financial Management, European Financial Management Association, vol. 2(1), pages 23-38, March.
    2. Michael Theobald, 1985. "Exclusion period and market model parameter nonstationarities in price reaction studies," Contemporary Accounting Research, John Wiley & Sons, vol. 2(1), pages 1-22, September.
    3. Michael Theobald, 1985. "Période d'exclusion et paramètres non†stationnaires d'un modèle de marché dans des études de réactions des prix," Contemporary Accounting Research, John Wiley & Sons, vol. 2(1), pages 23-45, September.
    4. Balasingham Balachandran & John Cadle & Michael Theobald, 1999. "Analysis of price reactions to interim dividend reductions — a note," Applied Financial Economics, Taylor & Francis Journals, vol. 9(4), pages 305-314.
    5. Theobald, Michael & Yallup, Peter, 2004. "Determining security speed of adjustment coefficients," Journal of Financial Markets, Elsevier, vol. 7(1), pages 75-96, January.

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