Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments November 2001 erstellt
Beschreibung:
In this paper the dynamics underlying the Epps effect (Epps, 1979) are investigated. Using Monte Carlo simulations and the analysis of high frequency foreign exchange rate and stock price data, it is shown that the Epps effect is mainly due to two reasons: the non-synchronicity of price observations and the existing lead-lag relationship among asset prices. In order to compute co-volatilities, an original method based upon Fourier analysis is adopted; this method performs well in estimating correlations precisely, as illustrated by simulated experiments. Being naturally embedded in the frequency domain, this estimator is well suited to the study of the Epps effect