Noise and efficient variance in the Indonesia Stock Exchange

Thomas Henker, Zaäfri A. Husodo

Research output: Contribution to journalArticleResearchpeer-review

1 Citation (Scopus)

Abstract

We separate noise from information related variance for stocks traded on the Indonesian Stock Exchange with a realized variance estimator. We find that the average optimal sampling frequency to estimate the realized variance is 9 min and that market quality has improved after 2004. The positive relation between the standard deviation of the noise variance and the square root of the efficient realized variance implies that as uncertainty about asset values increases the risk of transacting with traders with superior information increases as well. Furthermore, variance ratio comparisons reveal that private information is a significant trading component on the IDX. © 2009 Elsevier B.V. All rights reserved.

Original languageEnglish
Pages (from-to)199-216
Number of pages18
JournalPacific Basin Finance Journal
Volume18
Issue number2
DOIs
Publication statusPublished - Apr 2010
Externally publishedYes

Fingerprint

Realized variance
Stock exchange
Indonesia
Uncertainty
Sampling
Variance ratio
Asset value
Standard deviation
Market quality
Private information
Estimator
Traders

Cite this

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Noise and efficient variance in the Indonesia Stock Exchange. / Henker, Thomas; Husodo, Zaäfri A.

In: Pacific Basin Finance Journal, Vol. 18, No. 2, 04.2010, p. 199-216.

Research output: Contribution to journalArticleResearchpeer-review

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