Linear and Nonlinear Association Measures With Intraday/High Frequency Data for All Ibovespa Stocks

Abstract

LINEAR AND NONLINEAR ASSOCIATION MEASURES WITH INTRADAY/HIGH FREQUENCY DATA FOR ALL IBOVESPA STOCKSAlexandre Costa -Alexander Souza Block -Paulo Sérgio Ceretta ABSTRACTWe analyze four types of association measurements, the Pearson's Correlation, the Coefficient of Determination, the Multidimensional Association and the Maximal Information Coefficient, the two first linear, and the other two, nonlinear. We utilize 10 minutes intraday data of all Ibovespa stocks, that account for the main stock market index in Brazil. Not much of the methods used in this paper have been seen in financial literature, hence the motivation for this study. The methodology is meaningful to traders, as some stocks are highly correlated to the main index, one can base a strategy when they are trading independently in a given day as this pattern should revert to the mean. One of the most important findings of this work is that treating data as nonlinear yielded stronger results.Keywords: Multidimensional Association; Maximal Information Coefficient; Coefficient of Determination; Ibovespa; Intraday. RESUMENAnalizamos cuatro tipos de medidas de asociación, la Correlación de Pearson, el Coeficiente de Determinación, la Asociación Multidimensional y el Coeficiente Máximo de Información, los dos primeros, lineal, y los otros dos, no lineal. Utilizamos 10 minutos de datos dentro de un día, de todas las acciones Ibovespa, que cuenta para el principal índice de acciones en el mercado de Brasil. En la literatura financiera no hay mucho sobre los métodos utilizados en este trabajo, de dónde viene la motivación para el estudio. La metodología es significativa para negociantes, así como algunas acciones son altamente correlacionadas con el principal índice, un puede ser la base estratégica cuando están operando independientemente en un dado día, como este estándar podría reverter la significación. Uno de los más importantes resultados de este trabajo es que el tratamiento de los dados como no lineal produjeron resultados más fuertes. Palabras-clave:

GetHFData: A R package for downloading and aggregating high frequency trading data from Bovespa

“…Although most studies using intraday data addressed risk and return topics, this type of data has also been used in the analysis of other subjects such as market liquidity and its commonalities (Victor et al, 2013, Silveira et al, 2014, Casarin, 2011, Marquezin and De Mattos, 2014, Perlin, 2013, bid-ask spreads/order book analysis (Cajueiro and Tabak, 2007, Maluf and Otiniano, 2014, asymmetric information and corporate governance (Barbedo et al, 2007, Neto et al, 2012, Martins and Paulo, 2014, computation and algorithm programming (Silva et al, 2014, high frequency data distribution (Horta and Ziegelmann, 2011, Cortines and Riera, 2007, Block et al, 2015 and other research topics in Finance (Taufemback and Da Silva, 2011, Caetano and Yoneyama, 2007, Biage et al, 2010, Perlin et al, 2014. Table 1 summarizes recent high frequency data studies in Brazil.…”