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Tests of non-linearity using LIFFE futures transactions price data

Ap Gwilym, O., Brooks, C., Clare, A. and Thomas, S. (1999) Tests of non-linearity using LIFFE futures transactions price data The Manchester School, 67, (2), pp. 167-186. (doi:10.1111/1467-9957.00140).

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This paper presents and implements a number of tests for non-linear dependence and a test for chaos using transactions prices on three LIFFE futures contracts: the Short Sterling interest rate contract, the Long Gilt government bond contract, and the FTSE 100 stock index futures contract. While previous studies of high frequency futures market data use only those transactions which involve a price change, we use all of the transaction prices on these contracts whether they involve a price change or not. Our results indicate irrefutable evidence of non-linearity in two of the three contracts, although we find no evidence of a chaotic process in any of the series. We are also able to provide some indications of the effect of the duration of the trading day on the degree of non-linearity of the underlying contract. The trading day for the Long Gilt contract was extended in August 1994, and prior to this date there is no evidence of any structure in the return series. However, after the extension of the trading day we do find evidence of a non-linear return structure

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Published date: 1999


Local EPrints ID: 37360
ISSN: 1463-6786
PURE UUID: 15c8a878-5018-42db-b55c-2eea29f81fc0

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Date deposited: 25 Apr 2007
Last modified: 17 Jul 2017 15:42

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Author: O. Ap Gwilym
Author: C. Brooks
Author: A. Clare
Author: S. Thomas

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