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Extracting global stochastic trend from non-synchronous data

Author

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  • Korhonen, Iikka
  • Peresetsky, Anatoly

Abstract

We use a Kalman filter type model of financial markets to extract a global stochastic trend from the discrete non-synchronous data on daily stock market index returns of different stock exchanges. The model is tested for robustness. In addition, we derive "most important" hours of world financial market and estimate the relative importance of local versus global news for different stock markets. The model generates results that are consistent with intuition.

Suggested Citation

  • Korhonen, Iikka & Peresetsky, Anatoly, 2013. "Extracting global stochastic trend from non-synchronous data," BOFIT Discussion Papers 15/2013, Bank of Finland Institute for Emerging Economies (BOFIT).
    • Handle: RePEc:zbw:bofitp:bdp2013_015
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    References listed on IDEAS

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    1. Gallant, A. Ronald & Tauchen, George, 1996. "Which Moments to Match?," Econometric Theory, Cambridge University Press, vol. 12(4), pages 657-681, October.
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    3. Cartea, Álvaro & Karyampas, Dimitrios, 2011. "Volatility and covariation of financial assets: A high-frequency analysis," Journal of Banking & Finance, Elsevier, vol. 35(12), pages 3319-3334.
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    6. Korhonen, Iikka & Peresetsky, Anatoly, 2013. "What determines stock market behavior in Russia and other emerging countries?," BOFIT Discussion Papers 4/2013, Bank of Finland Institute for Emerging Economies (BOFIT).
    7. Byung Yoon Bae & Dong Heon Kim, 2011. "Global and Regional Yield Curve Dynamics and Interactions: The Case of Some Asian Countries," International Economic Journal, Taylor & Francis Journals, vol. 25(4), pages 717-738, December.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    emerging stock markets; transition economies; financial market integration; stock market returns; global stochastic trend; state space model; Kalman filter; non-synchronous data;
    All these keywords.

    JEL classification:

    • C49 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Other
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F65 - International Economics - - Economic Impacts of Globalization - - - Finance

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