Normality of stock returns with event time clocks. (3rd July 2015)

• Record Type: Journal Article
• Authors: Ling, Xin
• Is Part Of: Accounting and finance. Volume 57:(2017)Supplement 1
• Page Start: 277
• Page End: 298
• Publication Date: 2015-07-03
• Subjects: Event clock -- Intraday stock return -- Return distribution -- Transaction clock -- Normality; Accounting -- Periodicals; Finance -- Periodicals; 657.05
• DOI: 10.1111/acfi.12150
• Languages: English
• ISSNs: 0810-5391

Abstract

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.