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Computational Statistics

, Volume 17, Issue 2, pp 233–249 | Cite as

Tackling Boundary Effects in Nonparametric Estimation of Intra-Day Liquidity Measures

  • Joachim Grammig
  • Reinhard Hujer
  • Stefan Kokot
Article

Summary

We investigate methods to estimate intra-day liquidity measures which take into account boundary bias problems affecting the open and closing trading period. In a simulation study we demonstrate the severity of boundary effects when using standard kernel approaches and find that local linear as well as variable kernel estimators offer a much improved performance. In an empirical application using financial transactions data our alternative estimators are able to detect the striking asymmetry between the open and close of the New York stock exchange trading process, while standard kernel smoothers fail to do so.

Keywords

Liquidity nonparametric estimation boundary effects financial transactions data local linear estimation variable kernel methods 

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Copyright information

© Physica-Verlag 2002

Authors and Affiliations

  • Joachim Grammig
    • 1
    • 2
  • Reinhard Hujer
    • 2
  • Stefan Kokot
    • 2
  1. 1.Center for Operations Research and EconometricsLouvain-la-NeuveBelgium
  2. 2.Faculty of Economics and Business AdministrationJohann Wolfgang Goethe-UniversityFrankfurtGermany

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