one simple method used in practice (and the basis for correlation swap for 
example) is to use 3 series of correlation using 3-day returns (or even 5 
or 20)




Adrian Trapletti <a.trapletti@swissonline.ch> 
Sent by: r-sig-finance-bounces@stat.math.ethz.ch
11/14/2008 03:07 PM

To
R-Finance <r-sig-finance@stat.math.ethz.ch>
cc

Subject
Re: [R-SIG-Finance] Correlation between two asynchronous time   series?






>
> Message: 4
> Date: Thu, 13 Nov 2008 21:53:14 -0800
> From: Michael <comtech.usa@gmail.com>
> Subject: [R-SIG-Finance] correlation between two asynchronous time
>                series?
> To: r-sig-finance@stat.math.ethz.ch
> Message-ID:
> <b1f16d9d0811132153qd277378ka3d29b9d30a5d753@mail.gmail.com>
> Content-Type: text/plain; charset=ISO-8859-1
>
> Hi all,
>
> If I want to find out the correlation between two time series, one is
> the Hong Kong stock index, the other is the S&P 500. The two markets
> open at two different time.
>
> What impact it might have on my estimate of the correlation of the two
> series? 
Big impact.
> How do I address this asynchronous time series problem? Any
> good models?
> 
Either you use something along the lines of 
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=332901or better you 
use high frequency data (e.g., the S&P 500 futures is open almost 24 
hours and you will get overlapping hours with the Asian markets).
> Thanks a lot!
>
> 
Best regards
Adrian

-- 
Adrian Trapletti
Wildsbergstrasse 31
8610 Uster
Switzerland

Phone : +41 (0) 44 9945630
Mobile : +41 (0) 76 3705631

Email : a.trapletti@swissonline.ch

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