Abstract
Using the wick's difference from the classical Japanese candlestick representation of daily open, high, low, close prices brings efficiency when estimating the correlation in a bivariate Brownian motion. An interpretation of the correlation estimator in Rogers and Zhou (2008) in the light of wicks' difference allows us to suggest modifications, which lead to an increased efficiency and robustness against the baseline model. An empirical study on four major financial markets confirms the advantages of the modified estimator.
Original language | English |
---|---|
Pages (from-to) | 1615-1630 |
Number of pages | 16 |
Journal | Quantitative Finance |
Volume | 16 |
Issue number | 10 |
Early online date | 22 Apr 2016 |
DOIs | |
Publication status | Published - 2016 |
Keywords
- Japanese candlesticks
- Correlation
- Estimation
- Brownian motion
- Jump diffusions