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Modeling Comovements in Trading Intensities to Distinguish Sector and Stock Specific News

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Author Info

  • Spierdijk, L.
  • Nijman, T.E.
  • Soest, A.H.O. van

    (Tilburg University, Center for Economic Research)

Abstract

In this paper we propose a bivariate model for the trading intensities of stocks in a particular industry.The model consists of a univariate duration model for trades in either of the stocks and a probit-specification for which of the two stocks is traded.We apply the model to the trading intensities of stocks of US department store operators listed on the NYSE, using high frequency transaction data during the period August 1 until October 31, 1999.We establish significant comovements in the trading intensities of US department stocks, which we explain by distinguishing sector and stock specific news contained in the trading intensities.We provide estimates of the amounts of sector and stock specific news contained in the trading intensities and show that all stocks under consideration convey both sector and stock specific news.

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Bibliographic Info

Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2002-69.

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Date of creation: 2002
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Handle: RePEc:dgr:kubcen:200269

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Related research

Keywords: stock exchanges; duration analysis;

References

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  1. Diamond, Douglas W. & Verrecchia, Robert E., 1987. "Constraints on short-selling and asset price adjustment to private information," Journal of Financial Economics, Elsevier, vol. 18(2), pages 277-311, June.
  2. Robert F. Engle & Jeffrey R. Russell, 1998. "Autoregressive Conditional Duration: A New Model for Irregularly Spaced Transaction Data," Econometrica, Econometric Society, vol. 66(5), pages 1127-1162, September.
  3. E.K. Berndt & B.H. Hall & R.E. Hall, 1974. "Estimation and Inference in Nonlinear Structural Models," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 3, number 4, pages 103-116 National Bureau of Economic Research, Inc.
  4. Robert F. Engle & Asger Lunde, 2003. "Trades and Quotes: A Bivariate Point Process," Journal of Financial Econometrics, Society for Financial Econometrics, vol. 1(2), pages 159-188.
  5. Easley, David & O'Hara, Maureen, 1992. " Time and the Process of Security Price Adjustment," Journal of Finance, American Finance Association, vol. 47(2), pages 576-605, June.
  6. Harvey, A C, 1976. "Estimating Regression Models with Multiplicative Heteroscedasticity," Econometrica, Econometric Society, vol. 44(3), pages 461-65, May.
  7. Anat R. Admati, Paul Pfleiderer, 1988. "A Theory of Intraday Patterns: Volume and Price Variability," Review of Financial Studies, Society for Financial Studies, vol. 1(1), pages 3-40.
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Cited by:
  1. Clive G. Bowsher, 2003. "Modelling Security Market Events in Continuous Time: Intensity Based, Multivariate Point Process Models," Economics Papers 2003-W03, Economics Group, Nuffield College, University of Oxford.
  2. Simonsen, Ola, 2005. "An Empirical Model for Durations in Stocks," UmeÃ¥ Economic Studies 657, Umeå University, Department of Economics.
  3. Ola Simonsen, 2007. "An empirical model for durations in stocks," Annals of Finance, Springer, vol. 3(2), pages 241-255, March.

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