Panel Intensity Models with Latent Factors: An Application to the Trading Dynamics on the Foreign Exchange Market¤
AbstractWe develop a panel intensity model, with a time varying latent factor, which captures the influence of unobserved time effects and allows for correlation across individuals. The model is designed to analyze individual trading behavior on the basis of trading activity datasets, which are characterized by four dimensions: an irregularly-spaced time scale, trading activity types, trading instruments and investors. Our approach extends the stochastic conditional intensity model of Bauwens & Hautsch (2006) to panel duration data. We show how to estimate the model parameters by a simulated maximum likelihood technique adopting the efficient importance sampling approach of Richard & Zhang (2005). We provide an application to a trading activity dataset from an internet trading platform in the foreign exchange market and we find support for the presence of behavioral biases and discuss implications for portfolio theory.
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Bibliographic InfoPaper provided by Center of Finance and Econometrics, University of Konstanz in its series CoFE Discussion Paper with number 07-02.
Length: 30 pages
Date of creation: 28 Feb 2007
Date of revision:
Find related papers by JEL classification:
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
- F31 - International Economics - - International Finance - - - Foreign Exchange
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-04-28 (All new papers)
- NEP-ECM-2007-04-28 (Econometrics)
- NEP-ETS-2007-04-28 (Econometric Time Series)
- NEP-MST-2007-04-28 (Market Microstructure)
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.:
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- repec:att:wimass:9520 is not listed on IDEAS
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