Using high-frequency trade and quote data from the Prague Stock Exchange, this paper investigates the empirical behavior of price durations defined as the time needed for a quote midpoint to move by a given amount. Focusing on the three most liquid securites traded on the exchange - Cesky Telecom, CEZ and Komercni Banka - we estimate the autoregressive conditional duration (ACD) models for price duration series and test several market microstructure hypotheses suggested by the infomation-based models of market microstructure. Similarly to earlier studies, we find that price durations exhibit diurnal patterns, overdispersion and substantial persistence which can be adequately captured by the ACD model. The market microstructure hypotheses, however, do not find sound empirical support in our results.
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Publisher Info
Paper provided by Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies in its series Working Papers IES with number
80.
Length: 21 pages Date of creation: 2005 Date of revision:
2005 Publication status: Published in Finance a uver - Czech Journal of Economics and Finance, 2006, vol. 56, no. 5-6, pages 223-245 Handle: RePEc:fau:wpaper:wp080
Find related papers by JEL classification: G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation