Correlation between two asynchronous time series?
When I was playing with that, it looked like 5 days (i.e., weekly) was about right. There seemed to be some asynchrony visible (in equities) at 3 days. Pat
Nicolas Mougeot wrote:
one simple method used in practice (and the basis for correlation swap for example) is to use 3 series of correlation using 3-day returns (or even 5 or 20) Adrian Trapletti <a.trapletti at swissonline.ch> Sent by: r-sig-finance-bounces at stat.math.ethz.ch 11/14/2008 03:07 PM To R-Finance <r-sig-finance at stat.math.ethz.ch> cc Subject Re: [R-SIG-Finance] Correlation between two asynchronous time series?
Message: 4
Date: Thu, 13 Nov 2008 21:53:14 -0800
From: Michael <comtech.usa at gmail.com>
Subject: [R-SIG-Finance] correlation between two asynchronous time
series?
To: r-sig-finance at stat.math.ethz.ch
Message-ID:
<b1f16d9d0811132153qd277378ka3d29b9d30a5d753 at mail.gmail.com>
Content-Type: text/plain; charset=ISO-8859-1
Hi all,
If I want to find out the correlation between two time series, one is
the Hong Kong stock index, the other is the S&P 500. The two markets
open at two different time.
What impact it might have on my estimate of the correlation of the two
series?
Big impact.
How do I address this asynchronous time series problem? Any
good models?
Either you use something along the lines of http://papers.ssrn.com/sol3/papers.cfm?abstract_id=332901or better you use high frequency data (e.g., the S&P 500 futures is open almost 24 hours and you will get overlapping hours with the Asian markets).
Thanks a lot!
Best regards Adrian