Roberto Renò on EXcess Idle Time

Speaker:  Roberto Renò - Università di Siena
  Thursday, December 11, 2014 at 12:30 PM Aula E, Palazzo di Economia

We introduce a novel economic indicator, named excess idle time (EXIT), measuring the extent of sluggishness in observed financial prices. Using a complete limit theory and formal tests, we provide econometric support for the fact that high-frequency transaction prices are, coherently with liquidity and asymmetric information theories of price determination, generally stickier than implied by the ubiquitous semi-martingale assumption and its noise-contaminated counterpart. EXIT provides, for every asset and each trading day, an effective proxy for the extent of illiquidity which is easily implementable using transaction prices only. When applied to the mar- ket, EXIT uncovers an economically-meaningful short-term and long-term compensation for illiquidity risk in market returns.  

Title Format  (Language, Size, Publication date)
Paper  pdfpdf (it, 1887 KB, 05/12/14)

Programme Director
Diego Lubian

External reference
Angelo Zago

Publication date
December 5, 2014