Normality of stock returns with event time clocks |
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Authors: | Xin Ling |
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Institution: | School of Business, the University of Queensland, Brisbane, QLD, Australia |
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Abstract: | We introduce a different way to measure time using event clocks, with which we can observe a normal distribution of intraday stock returns. Most finance studies employ a ‘default’ time measurement that uses a calendar clock. Cumulative evidence from prior literature shows that returns with a calendar clock follow a distribution with an excess kurtosis and a heavier tail, relative to a normal distribution. We examine the distribution of intraday stock returns using different clocks. We find that returns do not follow a normal distribution with a traditional calendar clock, but do follow a normal distribution when event clocks are applied. |
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Keywords: | Event clock Intraday stock return Return distribution Transaction clock Normality |
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