Hostname: page-component-78c5997874-g7gxr Total loading time: 0 Render date: 2024-11-08T09:16:38.515Z Has data issue: false hasContentIssue false
  • English
  • Français

Transaction Data Tests of the Mixture of Distributions Hypothesis

Published online by Cambridge University Press:  06 April 2009

Lawrence Harris
Get access Rights & Permissions [Opens in a new window]

Abstract

This paper presents new tests of the mixture of distributions hypothesis. Previous tests examined security prices and volume measured only at daily intervals. Here, differential implications of the hypothesis for transaction data are derived and tested. The new predictions emanate from the assumption that prices and volume evolve at uniform rates in transaction time. The results support this assumption and the mixture of distributions hypothesis in general. In addition, the tests suggest that the daily transaction-count may be a useful instrumental variable for estimating unobserved realizations of stochastic price variances.

Type
Research Article
Information
Journal of Financial and Quantitative Analysis , Volume 22 , Issue 2 , June 1987 , pp. 127 - 141
Copyright
Copyright © School of Business Administration, University of Washington 1987

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

REFERENCES

[1]Brada, J.; Ernst, H.; and Tassel, J. Van. “The Distribution of Stock Price Differences: Gaussian after All?” Operations Research, 14 (03–04 1966), 334–340.CrossRefGoogle Scholar
[2]Brown, S. J., and Warner, J. B.. “Using Daily Stock Returns: The Case of Event Studies.” Journal of Financial Economics, 14 (03 1985), 3–32.CrossRefGoogle Scholar
[3]Clark, P. K. “A Subordinated Stochastic Process Model with Finite Variance for Speculative Prices.” Econometrica, 41 (01 1973), 135–155.CrossRefGoogle Scholar
[4]Epps, T. W., and Epps, M. L.. “The Stochastic Dependence of Security Price Changes and Transaction Volumes: Implications for the Mixture-of-Distributions Hypothesis.” Econometrica, 44 (03 1976), 305–321.CrossRefGoogle Scholar
[5]Gottlieb, G., and Kalay, A.. “Implications of the Discreteness of Observed Stock Prices.” Journal of Finance, 40 (03 1985), 135–153.CrossRefGoogle Scholar
[6]Harris, L. “A Theoretical and Empirical Analysis of the Distribution of Speculative Prices and of the Relation between Absolute Price Change and Volume.” Unpubl. Ph.D. diss., Univ. of Chicago (1982).Google Scholar
[7]Harris, L. “Cross-security Tests of the Mixture of Distribution Hypothesis.” Journal of Financial and Quantitative Analysis, 21 (03 1986), 39–46.CrossRefGoogle Scholar
[8]Kon, S. “Models of Stock Returns—A Comparison.” Journal of Finance, 39 (03 1984), 147–165.Google Scholar
[9]Morgan, I. G. “Stock Prices and Heteroskedasticity.” Journal of Business, 49 (10 1976), 496–508.CrossRefGoogle Scholar
[10]Roll, R., and French, K.. “Is Trading Self-Generating?” Working Paper, Grad. School of Management, UCLA (1984).Google Scholar
[11]Tauchen, G., and Pitts, M.. “The Price Variability-Volume Relationship on Speculative Markets.” Econometrica, 51 (03 1983), 485–505.CrossRefGoogle Scholar
[12]Westerfield, R. “The Distribution of Common Stock Price Changes: An Application of Transactions Time and Subordinated Stochastic Models.” Journal of Financial and Quantitative Analysis, 12 (12 1977), 743–765.CrossRefGoogle Scholar
[13]Wood, R. A.; McInish, T.; and Ord, J. K.. “An Investigation of Transactions Data for NYSE Stocks.” Journal of Finance, 15 (07 1985), 723–739.CrossRefGoogle Scholar