Article ID Journal Published Year Pages File Type
5091280 Journal of Banking & Finance 2006 6 Pages PDF
Abstract
H. Wang and C. Wang [Visibility of the compass rose in financial asset returns: A quantitative study, J. Bank. Financ. 26 (2002), 1099-1111] derive a measure of the visibility of the radial patterns that appear in a plot of current and past returns, which are more commonly known as the compass rose. In theory, this measure should be positively related to the tick/volatility ratio. In practice however, we find that this relationship does not hold for higher tick/volatility ratios that are common to stock market data. Thus, the use of this measure is limited in real world applications. We propose a correction factor that improves the behaviour of the quality measure over higher tick/volatility ratios, however, further research is required to fully identify and correct the problem.
Related Topics
Social Sciences and Humanities Economics, Econometrics and Finance Economics and Econometrics
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