# Epps effect
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In [econometrics](/source/econometrics) and [time series analysis](/source/time_series_analysis), the '''Epps effect''', named after T. W. Epps, is the phenomenon that the empirical [correlation](/source/cross_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[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]] and discretization effects.[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]] Another study suggests that the effect also originates in investors' [herd behaviour](/source/herd_behaviour).[http://iopscience.iop.org/1367-2630/16/5/053040 - Modelling the short term herding behaviour of stock markets]
==References==
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Category:Multivariate time series
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