In econometrics and time series analysis, the '''Epps effect''', named after T. W. Epps, is the phenomenon that the empirical correlation between the returns of two different stocks decreases with the length of the interval for which the price changes are measured. The phenomenon is caused by non-synchronous/asynchronous trading<ref>Epps, T.W. (1979) Comovements in Stock Prices in the Very Short Run, ''Journal of the American Statistical Association'', 74, 291–298. [https://www.jstor.org/stable/2286325 jstor]</ref> and discretization effects.<ref>M. C. Münnix et al (2010) Impact of the tick-size on financial returns and correlations, ''Physica A'', 389 (21) 4828–4843. [https://arxiv.org/abs/1001.5124 arxiv]</ref> Another study suggests that the effect also originates in investors' herd behaviour.<ref>http://iopscience.iop.org/1367-2630/16/5/053040 - Modelling the short term herding behaviour of stock markets</ref>
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Category:Multivariate time series
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