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Normality of stock returns with event time clocks

Normality of stock returns with event time clocks We introduce a different way to measure time using event clocks, with which we can observe a normal distribution of intraday stock returns. Most finance studies employ a ‘default’ time measurement that uses a calendar clock. Cumulative evidence from prior literature shows that returns with a calendar clock follow a distribution with an excess kurtosis and a heavier tail, relative to a normal distribution. We examine the distribution of intraday stock returns using different clocks. We find that returns do not follow a normal distribution with a traditional calendar clock, but do follow a normal distribution when event clocks are applied. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Accounting & Finance Wiley

Normality of stock returns with event time clocks

Ling, Xin
Accounting & Finance , Volume 57 – Apr 1, 2017
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References (29)

Publisher
Wiley
Copyright
Accounting and Finance © 2017 AFAANZ
ISSN
0810-5391
eISSN
1467-629X
DOI
10.1111/acfi.12150
Publisher site
See Article on Publisher Site

Abstract

We introduce a different way to measure time using event clocks, with which we can observe a normal distribution of intraday stock returns. Most finance studies employ a ‘default’ time measurement that uses a calendar clock. Cumulative evidence from prior literature shows that returns with a calendar clock follow a distribution with an excess kurtosis and a heavier tail, relative to a normal distribution. We examine the distribution of intraday stock returns using different clocks. We find that returns do not follow a normal distribution with a traditional calendar clock, but do follow a normal distribution when event clocks are applied.

Journal

Accounting & Finance – Wiley

Published: Apr 1, 2017

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