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Transaction Data Tests of the Mixture of Distributions Hypothesis

Published online by Cambridge University Press:  06 April 2009

Lawrence Harris
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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

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References

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