Intraday Speed of Price Adjustment in the Jakarta Stock Exchange PDF Download
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Author: Zaäfri A. Husodo
Publisher:
ISBN:
Category :
Languages : en
Pages : 35
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Book Description
High frequency study at individual level in the Jakarta Stock Exchange is conducted in this research to reveal the dynamics at intraday level. Several apparent patterns emerge from analyzing the relation among the speed of adjustment coefficients, noise, and noise variance. It is found that the noise and noise variance are at a low level when the speed of adjustment coefficients achieves a fair level. The speed of adjustment coefficients, both at market and individual level show a periodic adjustment pattern at a daily interval. This justifies the importance of studying the dynamics of the price discovery as estimated in the speed of adjustment coefficient. Another important finding is that there is a positive relationship between the uncertainty of asset fundamental values and the corresponding bid-ask spreads. This reflects higher uncertainty about the fundamental value of the asset increases the risk of transacting with traders with superior information.
Author: Zaäfri A. Husodo
Publisher:
ISBN:
Category :
Languages : en
Pages : 35
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Book Description
High frequency study at individual level in the Jakarta Stock Exchange is conducted in this research to reveal the dynamics at intraday level. Several apparent patterns emerge from analyzing the relation among the speed of adjustment coefficients, noise, and noise variance. It is found that the noise and noise variance are at a low level when the speed of adjustment coefficients achieves a fair level. The speed of adjustment coefficients, both at market and individual level show a periodic adjustment pattern at a daily interval. This justifies the importance of studying the dynamics of the price discovery as estimated in the speed of adjustment coefficient. Another important finding is that there is a positive relationship between the uncertainty of asset fundamental values and the corresponding bid-ask spreads. This reflects higher uncertainty about the fundamental value of the asset increases the risk of transacting with traders with superior information.
Author: Zaäfri A. Husodo
Publisher:
ISBN:
Category :
Languages : en
Pages : 28
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Book Description
We examine the intraday trading and price dynamics for frequently traded stocks at the Indonesian Stock Exchange. Using trade price, time series generated at one, two, three, five, ten, fifteen, thirty and sixty-minute intervals, we estimate the speed of adjustment and the corresponding realized variance of these series. The objective of the estimation is to infer the noise impact to the deviation of observed prices from their fundamental value. The result from the speed of adjustment estimate is consistent with the realized variance estimator. Both conclude that the 50 most frequently traded stocks in the Indonesia Stock Exchange adjust to new information within 30 minutes. At the interval, the coefficient of the speed of price adjustment is insignificantly different from zero implying negligible noise impact to the observed price. Concurrently, the realized variance starts to stabilize at 30-minute interval purporting fading impact of noise to the realized variance estimate. The evidence justifies the use of realized variance at various intervals as a reliable indicator of price discovery rate in the Indonesia Stock Exchange.
Author: Zaäfri A. Husodo
Publisher:
ISBN:
Category :
Languages : en
Pages : 57
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Book Description
This study examines the price formation process, noise level, non-trading and component of bid-ask spreads of individual shares listed on the Jakarta Stock Exchange for the period from 2000 to 2004. The price formation process is estimated using speed of adjustment based on the simple partial adjustment method proposed by Amihud and Mendelson (1987) that was later extended into ARMA(1,1) estimation by Theobald and Yallup (2004). The results are consistent with studies for the U.S. and European markets that find short term underreaction in security returns for most stocks. We further find that large companies lead small companies in price adjustment to new information. Using the intervalling properties to approximate the time to adjustment, we find that large stocks need only one day to fully adjust to new information, while medium and small stocks need three and five days respectively. The predominant factor contributing to the speed for adjustment for stocks listed on the Jakarta Stock Exchange in the ARMA(1,1) model is the MA(1) component reflecting significant noise in the price formation process. We assume that noise contains two microstructure components, non-trading and bid-ask bounce. This study finds that the role of non-trading is too small to be reliably justified as the source of negative autocorrelation, resulting in overreaction to the speed of adjustment. Further evidence revealed that the role of bid-ask spread is significant in determining the sign of the autocorrelation coefficient. The decomposition of bid-ask spreads disclosed that the size of the adverse selection spread cost component is negatively correlated with the speed of adjustment.
Author: Zaafri Husodo
Publisher: LAP Lambert Academic Publishing
ISBN: 9783838377506
Category :
Languages : en
Pages : 156
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Book Description
This book contains three essays that explore the speed of adjustment, volatility and noise in the Indonesia Stock Exchange. The first essay found that the significant factor determining the noise in the speed of adjustment is bid-ask fluctuations. Further, the adverse selection cost is found to be a significant component determining the speed of adjustment level in the Indonesia Stock Exchange. The second essay analyses the exact time of adjustment at intraday frequency from 2000 to 2007. Both first and second moment estimation of the speed of adjustment provide consistent result of 30 minute adjustment period. The third essay analyses the second moment of continuously compounded returns from 2000 to 2007. Using the realized variance, the optimal frequency to estimate the efficient variance, on average, is nine minutes. Further, the variance ratio of daily efficient variance to daily open-to-close reveals significant private information underlying price process in the Indonesia Stock Exchange.
Author: James M. Patell
Publisher:
ISBN:
Category : Stocks
Languages : en
Pages : 50
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Book Description
Author: Catherine Sherman Woodruff
Publisher:
ISBN:
Category : Stocks
Languages : en
Pages : 234
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Book Description
Author: Zaafri Ananto Husodo
Publisher:
ISBN:
Category : Stock exchanges
Languages : en
Pages :
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Book Description
Author: Andrew J. Senchack
Publisher:
ISBN:
Category :
Languages : en
Pages : 17
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Book Description
Author: Yessy A. Peranginangin
Publisher:
ISBN:
Category :
Languages : en
Pages : 22
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Book Description
This study applies the ARMA model to estimate the speed of adjustment coefficients, as suggested by Theobald and Yallup (2004), in the IDX. There is not sufficient evidence to conclude that the IDX overreacts to information. However, the findings suggest that the market either underreacts or fully adjusts to information. The IDX displays significant underreactions at weekly intervals that occur after the full adjustment. Investors' reaction is not sensitive to the size and liquidity of the indices. Size alone could not provide sufficient explanation for the different adjustment pattern across sector indices.
Author: Ji-Chai Lin
Publisher:
ISBN:
Category :
Languages : en
Pages : 14
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Book Description
We estimate speeds of adjustment of individual stock prices to private information using daily data. We use a model in which private information gives rise to return variance and private information decays linearly over time. We find that, on average about 85 to 88 percent of private information is incorporated into prices within one trading day, with variation depending upon the stock's trading volume and whether the stock is listed on an exchange. The findings support strong form market efficiency.
