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How to Match Trades and Quotes for Nyse Stocks?

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  • Olivier Vergote

Abstract

This paper proposes a new procedure to determine the time of the prevailing quote relative to the time of the trade for NYSE stock data obtained from the TAQ database. The procedure tests whether the quote revision frequency around a trade is contaminated by quote revisions triggered by a trade, and then determines the smallest timing adjustment needed to eliminate this contamination. An application to various stocks and sample periods shows that the time difference between trade and quote reporting lags varies across stocks and time. The procedure takes this variation into account and hence offers a stock- and time-specific update to the Lee and Ready (1991) 5-second rule.

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File URL: http://www.econ.kuleuven.be/eng/ew/discussionpapers/Dps05/Dps0510.pdf
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Bibliographic Info

Paper provided by Katholieke Universiteit Leuven, Centrum voor Economische Studiën in its series Center for Economic Studies - Discussion papers with number ces0510.

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Date of creation: Mar 2005
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Handle: RePEc:ete:ceswps:ces0510

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Cited by:
  1. Paul Asquith & Rebecca Oman & Christopher Safaya, 2008. "Short Sales and Trade Classification Algorithms," NBER Working Papers 14158, National Bureau of Economic Research, Inc.
  2. Sylwia Nowak, 2008. "How Do Public Announcements Affect The Frequency Of Trading In U.S. Airline Stocks?," CAMA Working Papers 2008-38, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  3. Rosenthal, Dale W.R., 2008. "Modeling Trade Direction," MPRA Paper 10209, University Library of Munich, Germany.

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