Comovements in Trading activity: A Multivariate Autoregressive Model of Time Series Count Data Using Copulas
AbstractThis paper introduces the Multivariate Autoregressive Conditional Poisson model to deal with issues of discreteness, overdispersion and both auto- and cross-correlation, arising with multivariate counts. We model counts with a double Poisson and assume that conditionally on past observations the means follow a Vector Autoregression. We resort to copulas to introduce contemporaneous correlation. We advocate the use of our model as a feasible alternative to multivariate duration models and apply it to the study of sector and stock specific news related to the comovements in the number of trades per unit of time of the most important US department stores traded on the New York Stock Exchange. We show that the market leaders inside an specific sector, in terms of more sectorial information conveyed by their trades, are related to their size measured by their market capitalization.
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Date of creation: 11 Aug 2004
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Continuousation; Factor model; Market microstructure.;
Find related papers by JEL classification:
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
This paper has been announced in the following NEP Reports:
- NEP-ALL-2004-10-30 (All new papers)
- NEP-ETS-2004-10-30 (Econometric Time Series)
- NEP-FIN-2004-10-30 (Finance)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- 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.
- 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.
- 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.
- Engle, Robert F & Lunde, Asger, 1998. "Trades and Quotes: A Bivariate Point Process," University of California at San Diego, Economics Working Paper Series qt8bh079sq, Department of Economics, UC San Diego.
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