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Modelling Intraday Trading Activity Using Box-Cox-ACD Models

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Author Info
Nikolaus Hautsch () (University of Copenhagen)

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Abstract

In this paper, I model the intraday trading activity based on volume durations, i.e. the waiting time until a predetermined volume is absorbed by the market. Since this concept measures the trading volume per time it is strongly related to market liquidity. I focus on volumes measured independently of the side of the market as well as on buy volumes, sell volumes and volumes measured on both market sides simultaneously. For econometric modelling of the different duration concepts, the performance of alternative types of Box-Cox-ACD models are analyzed. By evaluating out-of-sample forecasts, evidence is provided that Box-Cox-ACD models are a valuable tool for predicting volume durations. It is shown that volume durations measured independently of the side of the market have the best predictability. Furthermore, I illustrate that the inclusion of explanatory variables capturing past market activities concerning the price process and imbalances between the buy and sell side of the market. The empirical study uses IBM transaction data from the NYSE.

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Publisher Info
Paper provided by Center of Finance and Econometrics, University of Konstanz in its series CoFE Discussion Paper with number 02-05.

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Length: 25 pages
Date of creation: 15 Feb 2002
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Handle: RePEc:knz:cofedp:0205

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Related research
Keywords: volume durations; liquidity concepts; Generalized F distribution; out-of-sample-forecasts;

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Find related papers by JEL classification:
C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions
C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis
G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies

References listed on IDEAS
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    Other versions:
  6. Fernandes, Marcelo & Grammig, Joachim, 2002. "A Family of Autoregressive Conditional Duration Models," Economics Working Papers (Ensaios Economicos da EPGE) 440, Graduate School of Economics, Getulio Vargas Foundation (Brazil). [Downloadable!]
    Other versions:
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  19. Luc Bauwens & Pierre Giot & Joachim Grammig & David Veredas, 2000. "A Comparison of Financial Duration Models via Density Forecasts," Econometric Society World Congress 2000 Contributed Papers 0810, Econometric Society. [Downloadable!]
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Full references

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. Wing Lon NG, 2004. "Duration and Order Type Clusters," Econometric Society 2004 Far Eastern Meetings 730, Econometric Society. [Downloadable!]
  2. Wing Lon NG, 2004. "Duration and Order Type Clusters," Econometric Society 2004 Australasian Meetings 272, Econometric Society. [Downloadable!]
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