On Bivariate Time-Varying Price Staleness

Abstract

Price staleness refers to the extent of zero returns in price dynamics. Bandi, Pirino, and Reno introduce two types of staleness: systematic and idiosyncratic staleness. In this study, we allow price staleness to be time-varying and study the statistical inference for idiosyncratic and common price staleness between two assets. We propose consistent estimators for both time-varying idiosyncratic and systematic price staleness and derive their asymptotic theory. Moreover, we develop a feasible nonparametric test for the simultaneous constancy of idiosyncratic and common price staleness. Our inference is based on infill asymptotics. Finally, we conduct simulation studies under various scenarios to assess the finite sample performance of the proposed approaches and provide an empirical application of the proposed theory.