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Noise and efficient variance in the Indonesia Stock Exchange

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  • Henker, Thomas
  • Husodo, Zaäfri A.

Abstract

We separate noise from information related variance for stocks traded on the Indonesian Stock Exchange with a realized variance estimator. We find that the average optimal sampling frequency to estimate the realized variance is 9Â min and that market quality has improved after 2004. The positive relation between the standard deviation of the noise variance and the square root of the efficient realized variance implies that as uncertainty about asset values increases the risk of transacting with traders with superior information increases as well. Furthermore, variance ratio comparisons reveal that private information is a significant trading component on the IDX.

Suggested Citation

  • Henker, Thomas & Husodo, Zaäfri A., 2010. "Noise and efficient variance in the Indonesia Stock Exchange," Pacific-Basin Finance Journal, Elsevier, vol. 18(2), pages 199-216, April.
    • Handle: RePEc:eee:pacfin:v:18:y:2010:i:2:p:199-216
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    References listed on IDEAS

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    Cited by:

    1. Usman Arief & Zaäfri Ananto Husodo, 2021. "Private Information from Extreme Price Movements (Empirical Evidences from Southeast Asia Countries)," International Symposia in Economic Theory and Econometrics, in: Recent Developments in Asian Economics International Symposia in Economic Theory and Econometrics, volume 28, pages 221-242, Emerald Group Publishing Limited.
    2. Sharma, Susan Sunila & Thuraisamy, Kannan & Madyan, Muhammad & Laila, Nisful, 2019. "Evidence of price discovery on the Indonesian stock exchange," Economic Modelling, Elsevier, vol. 83(C), pages 2-7.

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