Questions tagged [epps-effect]

The Epps effect is the stylized fact that the more accurate you are on two time series (i.e. the more you sample them), the lower the correlations according to the usual formula. It applies to any time series that do not exist at the same sampling rate: if you oversample one of them you create false information, if you undersample the other you throw away potentially meaningful information.

Filter by
Sorted by
Tagged with
1
vote
0answers
44 views

Sharpe ratio of strategy exploiting correlations that vary by time interval

The Epps effect "is the phenomenon that the empirical correlation between the returns of two different stocks decreases with the length of the interval for which the price changes are measured" (...
0
votes
1answer
138 views

Can we model components in a set of multivariate multi-period time-series data?

There are N data sets in periods occurring weekly/monthly, across a 10-year historical timeline. In each period, five dates are observed (labelled a to e), where a denotes the day the period starts/...