Trades and Quotes: A Bivariate Point Process
AbstractRecent empirical work has studied point processes of transactions in financial markets and observed clear time dependent patterns in these arrival times. However these studies do not examine the timing of quoted price changes. This paper formulates a bivariate point process to jointly analyze transaction and quote arrivals. In microstructure models, transactions may reveal private information which is then incorporated into new prices. This paper examines the speed of this information flow and the circumstances which govern it. One of the main conclusions are that conditional on past quote times, the impact of trade information is to make quote durations longer when there is more information flow rather than less. This is interpreted as evidence that limit order suppliers become more cautious in the presence of apparent informational trading.
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Bibliographic InfoPaper provided by Department of Economics, UC San Diego in its series University of California at San Diego, Economics Working Paper Series with number qt8bh079sq.
Date of creation: 01 Mar 1998
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international trade; bivariate point process;
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- Dufour, Alfonso & Engle, Robert F, 1999.
"Time and the Price Impact of a Trade,"
University of California at San Diego, Economics Working Paper Series
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NBER Working Papers
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