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Analysing liquidity and absorption limits of electronic markets with volume durations

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  • Wing Lon Ng

Abstract

This paper focuses on the liquidity of electronic stock markets applying a sequential estimation approach of models for volume duration with increasing threshold values. A modified ACD model with a Box-Tukey transformation and a flexible generalized beta distribution is proposed to capture the changing cluster structure of duration processes. The estimation results with German XETRA data reveal the market's absorption limit for high volumes of shares, expanding the time costs of illiquidity when trading these quantities.

Suggested Citation

  • Wing Lon Ng, 2008. "Analysing liquidity and absorption limits of electronic markets with volume durations," Quantitative Finance, Taylor & Francis Journals, vol. 8(4), pages 353-361.
    • Handle: RePEc:taf:quantf:v:8:y:2008:i:4:p:353-361
    DOI: 10.1080/14697680701545699
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    References listed on IDEAS

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    1. Meitz, Mika & Saikkonen, Pentti, 2008. "Ergodicity, Mixing, And Existence Of Moments Of A Class Of Markov Models With Applications To Garch And Acd Models," Econometric Theory, Cambridge University Press, vol. 24(5), pages 1291-1320, October.
    2. Alfonso Dufour & Robert F Engle, 2000. "The ACD Model: Predictability of the Time Between Concecutive Trades," ICMA Centre Discussion Papers in Finance icma-dp2000-05, Henley Business School, University of Reading.
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    Cited by:

    1. Ata Türkoğlu, 2016. "Normally distributed high-frequency returns: a subordination approach," Quantitative Finance, Taylor & Francis Journals, vol. 16(3), pages 389-409, March.
    2. Ping-Hung Chou & Pei-Shan Wu & Teng-Tsai Tu, 2014. "The Impact of Trader Behavior on Options Price Volatility," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 4(4), pages 503-516, April.
    3. Alex Petkevich & Andrew Prevost, 2018. "Managerial ability, information quality, and the design and pricing of corporate debt," Review of Quantitative Finance and Accounting, Springer, vol. 51(4), pages 1033-1069, November.

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