Author: | Shanken, J. |
Title: | Nonsynchronous data and the covariance-factor structure of returns. |
Journal: | Journal of Finance
1987 : JUN, VOL. 42:2, p. 221-231 |
Index terms: | ASSETS STATISTICAL METHODS |
Language: | eng |
Abstract: | It is indicated that the standard estimator of the covariance matrix of daily returns provides a distorted view of the true covariance-factor structure. An alternative estimator, based on a model of the price-adjustment delay process, reveals roughly twice as much co-variation in individual security returns. The number of factors identified also appears to increase when this estimator is employed. Since the linear space spanned by the estimated factor-loading vectors is quite sensitive to the estimator used, it is important that the consistent estimator be considered in the usual two-stage empirical investigations of the APT. |
SCIMA