An Analysis of the Impacts of Non-Synchronous Trading on Predictability: Evidence from the National Stock Exchange, India

50 Pages Posted: 9 Jun 2005

See all articles by Silvio John Camilleri

Silvio John Camilleri

University of Malta - Department of Banking and Finance - FEMA

Christopher J. Green

Loughborough University - Department of Economics

Date Written: November 2004

Abstract

The serial correlation effects which non-synchronous trading can induce in financial data have been documented by various researchers. In this paper we investigate non-synchronous trading effects in terms of the predictability that may be induced in the values of stock indices. This analysis is applied to emerging-market data, on the grounds that such markets might be less liquid and thus prone to a higher degree of non-synchronous trading. We use both a daily data set and a higher frequency one, since the latter is a prerequisite for capturing intra-day variations in trading activity. When considering one-minute interval data, we obtain clear evidence of predictability between indices with different degrees of non-synchronous trading. We then propose a simple test to infer whether such predictability is mainly attributable to non-synchronous trading or an actual delayed adjustment on part of traders. The results obtained from an intra-day analysis suggest that the former cause seems a better explanation for the observed predictability. Future research in this area is needed to shed light on the degree of data predictability which may be exclusively attributed to non-synchronous trading, and how empirical results may be influenced by the chosen data frequency.

Keywords: Non-Synchronous Trading, Stock Markets, National Stock Exchange of India

JEL Classification: G12, G14

Suggested Citation

Camilleri, Silvio John and Green, Christopher J., An Analysis of the Impacts of Non-Synchronous Trading on Predictability: Evidence from the National Stock Exchange, India (November 2004). Available at SSRN: https://ssrn.com/abstract=739344 or http://dx.doi.org/10.2139/ssrn.739344

Silvio John Camilleri (Contact Author)

University of Malta - Department of Banking and Finance - FEMA ( email )

Msida MSD 2080
Msida MSD 06
Malta

Christopher J. Green

Loughborough University - Department of Economics ( email )

York House
Loughborough LE11 3TU
Great Britain

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