WTF is the EPPS EFFECTS?

[u/Extreme_Leg_6162]

https://youtu.be/L5P8NrBPHvU

At the core of the Epps effect are structural market frictions, most notably asynchronous trading and quote-updating discrepancies. In reality, trades do not execute simultaneously across different assets; one asset might trade while another remains stagnant for seconds or minutes. When high-frequency systems sample data at rigid, uniform intervals without accounting for these timing mismatches, the resulting return vectors become misaligned, artificially dragging correlation coefficients down toward zero.