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Trading Fast and Slow: Security Market Events in Real Time

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  • Joel Hasbrouck
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    Abstract

    Continuous security markets evolve as a sequence of timed events. This study is a descriptive analysis of NYSE market data in which trades, quote revisions and orders are considered to constitute a stationary multivariate point process, which can be analyzed by standard time- and frequency-domain techniques. There are three principal findings. (1) Although occurrence intensities for different types of events are positively correlated, they are not characterized by the uniform proportionality that a strict sense of time deformation would require. (2) The frequencies and durations of informational epochs (periods of uncertainty and informational asymmetry) are highly variable. (3) The correlation in arrivals of market orders and opposing limit orders is zero or negative over periods of thirty minutes or less.

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    Bibliographic Info

    Paper provided by New York University, Leonard N. Stern School of Business- in its series New York University, Leonard N. Stern School Finance Department Working Paper Seires with number 99-012.

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    Date of creation: 19 Feb 1999
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    Handle: RePEc:fth:nystfi:99-012

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    Postal: U.S.A.; New York University, Leonard N. Stern School of Business, Department of Economics . 44 West 4th Street. New York, New York 10012-1126
    Phone: (212) 998-0100
    Web page: http://w4.stern.nyu.edu/finance/
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    7. 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.
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    Cited by:
    1. Large, Jeremy, 2007. "Measuring the resiliency of an electronic limit order book," Journal of Financial Markets, Elsevier, vol. 10(1), pages 1-25, February.
    2. Bowsher, Clive G., 2007. "Modelling security market events in continuous time: Intensity based, multivariate point process models," Journal of Econometrics, Elsevier, vol. 141(2), pages 876-912, December.
    3. Anthony Murphy & Marwan Izzeldin, 2005. "Order Flow, Transaction Clock, and Normality of Asset Returns: A Comment on Ané and Geman (2000)," Finance 0512005, EconWPA.
    4. Thierry Foucault & Ohad Kadan & Eugene Kandel, 2005. "Limit Order Book as a Market for Liquidity," Review of Financial Studies, Society for Financial Studies, vol. 18(4), pages 1171-1217.
    5. Owens, John P., 2005. "A market microstructure model with random overlapping information asymmetries," Finance Research Letters, Elsevier, vol. 2(2), pages 59-66, June.
    6. Ingrid Lo & Stephen G. Sapp, 2005. "Order Submission: The Choice between Limit and Market Orders," Working Papers 05-42, Bank of Canada.
    7. Hollifield, Burton & Miller, Robert A. & Sandås, Patrik & Slive, Joshua, 2002. "Liquidity Supply and Demand in Limit Order Markets," CEPR Discussion Papers 3676, C.E.P.R. Discussion Papers.

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