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Estimating liquidity using information on the multivariate trading process Author info | Abstract | Publisher info | Download info | Related research | Statistics Katarzyna Bien (Warsaw School of Economics)
Ingmar Nolte (University of Konstanz, CoFE)
Winfried Pohlmeier (University of Konstanz, CoFE, ZEW)
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In this paper we model the dynamic multivariate density of discrete bid and ask quote changes and their associated depths. We account for the contempo- raneous relationship between these trading marks by exploiting the concept of copula functions. Thereby we show how to model truncations of the mul- tivariate density in an easy way. A Metropolized-Independence Sampler is applied to draw from the dynamic multivariate density. The samples drawn serve to construct the dynamic density function of the quote slope liquidity measure, which enables us to quantify time varying liquidity risk. We analyze the influence of the decimalization at the NYSE on liquidity.
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Paper provided by Department of Applied Econometrics, Warsaw School of Economics in its series Working Papers with number
10.
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Length: 74 pages
Date of creation: 22 May 2006Date of revision:
Handle: RePEc:wse:wpaper:10Contact details of provider: Postal: 02-554 Warszawa, Al. Niepodległosci 164 Web page: http://www.sgh.waw.pl/instytuty/zes More information through EDIRC
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Keywords: Liquidity Copula Functions Trading Process Decimalization Metropolized-Independence Sampler Other versions of this item:
Find related papers by JEL classification: G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data) F30 - International Economics - - International Finance - - - General C30 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - General
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