What PRICE should we use?

There are four prices observed in the market. Financial press reports OPEN,HIGH,LOW,CLOSE.

1. There is a difference between Closing Price and Last Traded Price(LTP). NSE provides Closing price as last half an hour VWAP(Volume Weighted Average Price).

2.If Corporate actions(Bonus,Stock Split,Rights) happen how to adjust the price so that when we caluculate returns it does not give a wrong picture ?

3. CMIE-PROWESS gives ACP( Adjusted Closing Price). Yahoo Finance also gives Adj Close data.

Wonderful world of Econometrics

Financial Econometrics combines financial theory with econometric methods for forecasting.

1. The need for crunching huge data with availability of databases is bringing Financial Econometrics to the fore.


2. Some of the excellent authors in this field I came across are Chris Brooks, Tsay, Eric Zivot,Carol Alexander


3. I have yet to find an accesible book in the Indian Context with finacial data from Indian Exchanges. I hope NISM will bring out such a work. It could be good companion for their NSMD database. HF data analysis in the context of Indian Markets is a growing and important area.


4. High Frequency trading and Algorithmic Trading is adding to the requirement of familiarity with Financial Econometrics.


5. I think there are lot issues which traders implicitly assume needs to be empirically validated. Some of the examples are

Open Interest (OI) data in Futures as a predictor for nextday's Spot price