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Intra-day market activity

  • Gourieroux, Christian
  • Jasiak, Joanna
  • Le Fol, Gaelle

This paper presents a study of intra-day patterns of stock market activity and introduces duration based activity measures for single stocks and multiple assets. The proposed measures involve weighted durations, i.e. times necessary to sell (buy) a predetermined volume or value of stocks. As such, they capture dependencies between intra-trade durations, transaction volumes and prices, and can be interpreted as liquidity measures. This approach allows us to highlight the intra-day variations of liquidity, its costs and volatility, and to develop a liquidity based asset ordering. The extension to a multivariate analysis yields new insights into the dynamics of portfolio liquidity by revealing various aspects of asset substitution, including the effects of correlated trade intensities of portfolio components. Several examples are used to show that in practice, the proposed liquidity measures become efficient instruments for strategic block trading and optimal portfolio adjustments. The paper also contains an empirical study of asset activity on the Paris Bourse. We examine the liquidity dynamics throughout the day and reveal the existence of periodic patterns resulting from world-wide interactions of major stock markets. In the multivariate setup, we report evidence on common patterns and correlations of trade intensities of selected stocks.

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Article provided by Elsevier in its journal Journal of Financial Markets.

Volume (Year): 2 (1999)
Issue (Month): 3 (August)
Pages: 193-226

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Handle: RePEc:eee:finmar:v:2:y:1999:i:3:p:193-226
Contact details of provider: Web page: http://www.elsevier.com/locate/finmar

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  1. Copeland, Thomas E, 1979. "Liquidity Changes Following Stock Splits," Journal of Finance, American Finance Association, vol. 34(1), pages 115-41, March.
  2. Grossman, Sanford J & Miller, Merton H, 1988. " Liquidity and Market Structure," Journal of Finance, American Finance Association, vol. 43(3), pages 617-37, July.
  3. Garman, Mark B., 1976. "Market microstructure," Journal of Financial Economics, Elsevier, vol. 3(3), pages 257-275, June.
  4. Biais, Bruno & Hillion, Pierre & Spatt, Chester, 1995. " An Empirical Analysis of the Limit Order Book and the Order Flow in the Paris Bourse," Journal of Finance, American Finance Association, vol. 50(5), pages 1655-89, December.
  5. 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.
  6. Foster, F Douglas & Viswanathan, S, 1990. "A Theory of the Interday Variations in Volume, Variance, and Trading Costs in Securities Markets," Review of Financial Studies, Society for Financial Studies, vol. 3(4), pages 593-624.
  7. 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.
  8. Glosten, Lawrence R. & Milgrom, Paul R., 1985. "Bid, ask and transaction prices in a specialist market with heterogeneously informed traders," Journal of Financial Economics, Elsevier, vol. 14(1), pages 71-100, March.
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  11. Pagano, Marco, 1989. "Trading Volume and Asset Liquidity," The Quarterly Journal of Economics, MIT Press, vol. 104(2), pages 255-74, May.
  12. Yadav, Pradeep K. & Pope, Peter F., 1992. "Intraweek and intraday seasonalities in stock market risk premia: Cash and futures," Journal of Banking & Finance, Elsevier, vol. 16(1), pages 233-270, February.
  13. Thierry Foucault, 1994. "Price formation and order placement strategies in a dynamic order driven market," Economics Working Papers 99, Department of Economics and Business, Universitat Pompeu Fabra.
  14. Jones, Charles M & Kaul, Gautam & Lipson, Marc L, 1994. "Transactions, Volume, and Volatility," Review of Financial Studies, Society for Financial Studies, vol. 7(4), pages 631-51.
  15. Kyle, Albert S, 1985. "Continuous Auctions and Insider Trading," Econometrica, Econometric Society, vol. 53(6), pages 1315-35, November.
  16. Fourgeaud C & Gourieroux Christian & Pradel J, 1987. "Heterogeneity and hazard dominance in duration data models," CEPREMAP Working Papers (Couverture Orange) 8736, CEPREMAP.
  17. Muller, Ulrich A. & Dacorogna, Michel M. & Dave, Rakhal D. & Olsen, Richard B. & Pictet, Olivier V. & von Weizsacker, Jacob E., 1997. "Volatilities of different time resolutions -- Analyzing the dynamics of market components," Journal of Empirical Finance, Elsevier, vol. 4(2-3), pages 213-239, June.
  18. Gallant, A Ronald & Rossi, Peter E & Tauchen, George, 1992. "Stock Prices and Volume," Review of Financial Studies, Society for Financial Studies, vol. 5(2), pages 199-242.
  19. Engle, Robert F. & Russell, Jeffrey R., 1997. "Forecasting the frequency of changes in quoted foreign exchange prices with the autoregressive conditional duration model," Journal of Empirical Finance, Elsevier, vol. 4(2-3), pages 187-212, June.
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