A direct test of the mixture of distributions hypothesis

measuring the daily flow of information

Matthew Richardson, Tom Smith

Research output: Contribution to journalArticle

79 Citations (Scopus)

Abstract

This paper proposes and conducts direct tests of the mixture of distributions model for stock prices. By exploiting the model’s bivariate conditional normality of price changes and trading volume, these restrictions can be tested under very weak assumptions regarding the daily flow of information to the market. As a technical byproduct, important parameters governing the distribution of this unobservable information flow are estimated.

Original languageEnglish
Pages (from-to)101-116
Number of pages16
JournalJournal of Financial and Quantitative Analysis
Volume29
Issue number1
DOIs
Publication statusPublished - 1994
Externally publishedYes

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