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Trading Fast and Slow: Security Market Events in Real Time

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Author Info
Joel Hasbrouck
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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File URL: http://www.stern.nyu.edu/fin/workpapers/papers99/wpa99012.pdf
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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
Web page: http://w4.stern.nyu.edu/finance/
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References listed on IDEAS
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.:
  1. Clark, Peter K, 1973. "A Subordinated Stochastic Process Model with Finite Variance for Speculative Prices," Econometrica, Econometric Society, vol. 41(1), pages 135-55, January. [Downloadable!] (restricted)
  2. Robert F. Engle, 1996. "The Econometrics of Ultra-High Frequency Data," NBER Working Papers 5816, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  3. Hasbrouck, Joel, 1996. "Order characteristics and stock price evolution An application to program trading," Journal of Financial Economics, Elsevier, vol. 41(1), pages 129-149, May. [Downloadable!] (restricted)
  4. Richardson, Matthew & Smith, Tom, 1994. "A Direct Test of the Mixture of Distributions Hypothesis: Measuring the Daily Flow of Information," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 29(01), pages 101-116, March. [Downloadable!]
  5. Foster, F Douglas & Viswanathan, S, 1995. "Can Speculative Trading Explain the Volume-Volatility Relation?," Journal of Business & Economic Statistics, American Statistical Association, vol. 13(4), pages 379-96, October.
  6. Robert F. Engle & Asger Lunde, 1998. "Trades and Quotes: A Bivariate Point Process," University of California at San Diego, Economics Working Paper Series 98-07, Department of Economics, UC San Diego. [Downloadable!]
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  7. Hasbrouck, Joel, 1991. " Measuring the Information Content of Stock Trades," Journal of Finance, American Finance Association, vol. 46(1), pages 179-207, March. [Downloadable!] (restricted)
  8. Harris, Lawrence, 1987. "Transaction Data Tests of the Mixture of Distributions Hypothesis," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 22(02), pages 127-141, June. [Downloadable!]
  9. Ghysels, E. & Gourieroux, C. & Jasiak, J., 1995. "Market Time and Asset Price Movements: Theory and Estimation," Cahiers de recherche 9536, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
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  10. 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.
  11. Guillermo Llorente & Roni Michaely & Gideon Saar & Jiang Wang, 2002. "Dynamic Volume-Return Relation of Individual Stocks," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 15(4), pages 1005-1047.
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  12. Lyons, Richard K., 1995. "Tests of microstructural hypotheses in the foreign exchange market," Journal of Financial Economics, Elsevier, vol. 39(2-3), pages 321-351. [Downloadable!] (restricted)
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  13. Ghysels, Eric & Gourieroux, Christian & Jasiak, Joann, 2004. "Stochastic volatility duration models," Journal of Econometrics, Elsevier, vol. 119(2), pages 413-433, April. [Downloadable!] (restricted)
  14. Harris, Lawrence & Sofianos, George & Shapiro, James E, 1994. "Program Trading and Intraday Volatility," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 7(4), pages 653-85. [Downloadable!] (restricted)
  15. 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.
  16. Lyons, Richard K., 1996. "Optimal Transparency in a Dealer Market with an Application to Foreign Exchange," Journal of Financial Intermediation, Elsevier, vol. 5(3), pages 225-254, July. [Downloadable!] (restricted)
  17. Jong-Il Kim & Lawrence J. Lau, 1996. "The sources of Asian Pacific economic growth," Canadian Journal of Economics, Canadian Economics Association, vol. 29(s1), pages 448-54, April. [Downloadable!] (restricted)
  18. Kyle, Albert S, 1985. "Continuous Auctions and Insider Trading," Econometrica, Econometric Society, vol. 53(6), pages 1315-35, November. [Downloadable!] (restricted)
  19. Gallant, A Ronald & Rossi, Peter E & Tauchen, George, 1992. "Stock Prices and Volume," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 5(2), pages 199-242. [Downloadable!] (restricted)
  20. Jeffrey R. Russell & Robert F. Engle, 1998. "Econometric Analysis of Discrete-Valued Irregularly-Spaced Financial Transactions Data Using a New Autoregressive Conditional Multinomial Model," University of California at San Diego, Economics Working Paper Series 98-10, Department of Economics, UC San Diego. [Downloadable!]
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  21. Garbade, Kenneth & Lieber, Zvi, 1977. "On the independence of transactions on the New York Stock exchange," Journal of Banking & Finance, Elsevier, vol. 1(2), pages 151-172, October. [Downloadable!] (restricted)
  22. Ghysels, E. & Harvey, A. & Renault, E., 1995. "Stochastic Volatility," Papers 95.400, Toulouse - GREMAQ.
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  23. Karpoff, Jonathan M., 1987. "The Relation between Price Changes and Trading Volume: A Survey," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 22(01), pages 109-126, March. [Downloadable!]
  24. Glosten, Lawrence R, 1994. " Is the Electronic Open Limit Order Book Inevitable?," Journal of Finance, American Finance Association, vol. 49(4), pages 1127-61, September. [Downloadable!] (restricted)
  25. Lyons, Richard K., 1997. "A simultaneous trade model of the foreign exchange hot potato," Journal of International Economics, Elsevier, vol. 42(3-4), pages 275-298, May. [Downloadable!] (restricted)
  26. Andersen, Torben G, 1996. " Return Volatility and Trading Volume: An Information Flow Interpretation of Stochastic Volatility," Journal of Finance, American Finance Association, vol. 51(1), pages 169-204, March. [Downloadable!] (restricted)
  27. Tauchen, George E & Pitts, Mark, 1983. "The Price Variability-Volume Relationship on Speculative Markets," Econometrica, Econometric Society, vol. 51(2), pages 485-505, March. [Downloadable!] (restricted)
  28. Harris, Lawrence, 1986. "Cross-Security Tests of the Mixture of Distributions Hypothesis," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 21(01), pages 39-46, March. [Downloadable!]
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Cited by:
(explanations, 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.)

  1. Thierry Foucault & Ohad Kadan & Eugene Kandel, 2003. "Limit Order Book as a Market for Liquidity," Discussion Paper Series dp321, Center for Rationality and Interactive Decision Theory, Hebrew University, Jerusalem. [Downloadable!]
    Other versions:
  2. Clive G. Bowsher, 2005. "Modelling Security Market Events in Continuous Time: Intensity Based, Multivariate Point Process Models," Economics Papers 2005-W26, Economics Group, Nuffield College, University of Oxford. [Downloadable!]
    Other versions:
  3. Anthony Murphy & Marwan Izzeldin, 2006. "Order flow transaction clock and normality of asset returns: A comment on Ané and Geman (2000)," Working Papers 003090, Lancaster University Management School, Economics Department. [Downloadable!]
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  4. 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. [Downloadable!] (restricted)
  5. 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. [Downloadable!]
  6. Marwan Izzeldin, 2007. "Trading volume and the number of trades: a comparative study using high frequency data," Working Papers 004798, Lancaster University Management School, Economics Department. [Downloadable!]
  7. Ingrid Lo & Stephen G. Sapp, 2005. "Order Submission: The Choice between Limit and Market Orders," Working Papers 05-42, Bank of Canada. [Downloadable!]
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