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Structural breaks in point processes: With an application to reporting delays for trades on the New York stock exchange

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  • Andersson, Jonas

    ()
    (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration)

  • Moberg, Jan-Magnus

    ()
    (Dept. of Finance and Management Science, Norwegian School of Economics and Business Administration)

Abstract

In this paper some methods to determine the reporting delays for trades on the New York stock exchange are proposed and compared. The most successful method is based on a simple model of the quote revision process and a bootstrap procedure. In contrast to previous methods it accounts for autocorrelation and for variation originating both from the quote process itself and from estimation errors. This is obtained by the use of prediction intervals. The ability of the methods to determine when a trade has occurred is studied and compared with a previous method by Vergote (2005). This is done by means of a simulation study. An extensive empirical study shows the applicability of the method and that more reasonable results are obtained when accounting for autocorrelation and estimation uncertainty.

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Bibliographic Info

Paper provided by Department of Business and Management Science, Norwegian School of Economics in its series Discussion Papers with number 2007/28.

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Length: 26 pages
Date of creation: 19 Dec 2007
Date of revision:
Handle: RePEc:hhs:nhhfms:2007_028

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Web page: http://www.nhh.no/en/research-faculty/department-of-business-and-management-science.aspx
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Related research

Keywords: Quote revisions; bootstrap procedure; simulation;

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  1. Tarun Chordia, 2001. "Market Liquidity and Trading Activity," Journal of Finance, American Finance Association, vol. 56(2), pages 501-530, 04.
  2. Easley, David & O'Hara, Maureen & Saar, Gideon, 2001. "How Stock Splits Affect Trading: A Microstructure Approach," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 36(01), pages 25-51, March.
  3. Clifford A. Ball, 2001. "True Spreads and Equilibrium Prices," Journal of Finance, American Finance Association, vol. 56(5), pages 1801-1835, October.
  4. Roger Edelen & Simon Gervais, 2003. "The Role of Trading Halts in Monitoring a Specialist Market," Review of Financial Studies, Society for Financial Studies, vol. 16(1), pages 263-300.
  5. Engle, Robert F & Patton, Andrew J, 2000. "Impacts of Trades in an Error-Correction Model of Quote Prices," University of California at San Diego, Economics Working Paper Series qt6dm6093f, Department of Economics, UC San Diego.
  6. Busse, Jeffrey A. & Clifton Green, T., 2002. "Market efficiency in real time," Journal of Financial Economics, Elsevier, vol. 65(3), pages 415-437, September.
  7. Chordia, Tarun & Roll, Richard & Subrahmanyam, Avanidhar, 2002. "Order imbalance, liquidity, and market returns," Journal of Financial Economics, Elsevier, vol. 65(1), pages 111-130, July.
  8. Kalok Chan & Y. Peter Chung & Wai-Ming Fong, 2002. "The Informational Role of Stock and Option Volume," Review of Financial Studies, Society for Financial Studies, vol. 15(4), pages 1049-1075.
  9. Henker, Thomas & Wang, Jian-Xin, 2006. "On the importance of timing specifications in market microstructure research," Journal of Financial Markets, Elsevier, vol. 9(2), pages 162-179, May.
  10. Huang, Roger D & Stoll, Hans R, 1997. "The Components of the Bid-Ask Spread: A General Approach," Review of Financial Studies, Society for Financial Studies, vol. 10(4), pages 995-1034.
  11. Lee, Charles M C & Ready, Mark J, 1991. " Inferring Trade Direction from Intraday Data," Journal of Finance, American Finance Association, vol. 46(2), pages 733-46, June.
  12. Kryzanowski, Lawrence & Zhang, Hao, 2002. "Intraday Market Price Integration for Shares Cross-Listed Internationally," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 37(02), pages 243-269, June.
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