Impact of the tick-size on financial returns and correlations

@article{Munnix2010ImpactOT,
  title={Impact of the tick-size on financial returns and correlations},
  author={Michael C. Munnix and Rudi Schafer and T. Guhr},
  journal={Physica A-statistical Mechanics and Its Applications},
  year={2010},
  volume={389},
  pages={4828-4843}
}
  • Michael C. Munnix, Rudi Schafer, T. Guhr
  • Published 2010
  • Economics, Mathematics
  • Physica A-statistical Mechanics and Its Applications
  • We demonstrate that the lowest possible price change (tick-size) has a large impact on the structure of financial return distributions. It induces a microstructure as well as possibly altering the tail behavior. On small return intervals, the tick-size can distort the calculation of correlations. This especially occurs on small return intervals and thus contributes to the decay of the correlation coefficient towards smaller return intervals (Epps effect). We study this behavior within a model… CONTINUE READING

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