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Modelling Intraday Trading Activity Using Box-Cox-ACD Models

  • Nikolaus Hautsch

    ()

    (University of Copenhagen)

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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File URL: http://cofe.uni-konstanz.de/Papers/dp02_05.pdf
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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
Date of revision:
Handle: RePEc:knz:cofedp:0205
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  1. Nikolaus Hautsch, 1999. "Analyzing the Time between Trades with a Gamma Compounded Hazard Model. An Application to LIFFE Bund Future Transactions," CoFE Discussion Paper 99-03, Center of Finance and Econometrics, University of Konstanz.
  2. BAUWENS , Luc & GIOT, Pierre & GRAMMIG, Joachim & VEREDAS, David, 2000. "A comparison of financial duration models via density forecasts," CORE Discussion Papers 2000060, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Fernandes, Marcelo & Grammig, Joachim, 2006. "A family of autoregressive conditional duration models," Journal of Econometrics, Elsevier, vol. 130(1), pages 1-23, January.
  4. Frank Gerhard & Nikolaus Hautsch, 1999. "Volatility Estimation on the Basis of Price Intensities," CoFE Discussion Paper 99-19, Center of Finance and Econometrics, University of Konstanz.
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  12. Jason Greene & Scott Smart, 1999. "Liquidity Provision and Noise Trading: Evidence from the "Investment Dartboard" Column," Journal of Finance, American Finance Association, vol. 54(5), pages 1885-1899, October.
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  15. Conroy, Robert M & Harris, Robert S & Benet, Bruce A, 1990. " The Effects of Stock Splits on Bid-Ask Spreads," Journal of Finance, American Finance Association, vol. 45(4), pages 1285-95, September.
  16. Keim, Donald B & Madhaven, Ananth, 1996. "The Upstairs Market for Large-Block Transactions: Analysis and Measurement of Price Effects," Review of Financial Studies, Society for Financial Studies, vol. 9(1), pages 1-36.
  17. 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.
  18. Gourieroux, Christian & Jasiak, Joanna & Le Fol, Gaelle, 1999. "Intra-day market activity," Journal of Financial Markets, Elsevier, vol. 2(3), pages 193-226, August.
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  20. Bessembinder, Hendrik, 2000. "Tick Size, Spreads, and Liquidity: An Analysis of Nasdaq Securities Trading near Ten Dollars," Journal of Financial Intermediation, Elsevier, vol. 9(3), pages 213-239, July.
  21. Easley, David, et al, 1996. " Liquidity, Information, and Infrequently Traded Stocks," Journal of Finance, American Finance Association, vol. 51(4), pages 1405-36, September.
  22. David Veredas & Juan Rodriguez-Poo & Antoni Espasa, 2001. "On the (Intradaily) Seasonality and Dynamics of a Financial Point Process : A Semiparametric Approach," Working Papers 2001-19, Centre de Recherche en Economie et Statistique.
  23. Al-Suhaibani, Mohammad & Kryzanowski, Lawrence, 2000. "An exploratory analysis of the order book, and order flow and execution on the Saudi stock market," Journal of Banking & Finance, Elsevier, vol. 24(8), pages 1323-1357, August.
  24. Easley, David & O'Hara, Maureen, 1991. " Order Form and Information in Securities Markets," Journal of Finance, American Finance Association, vol. 46(3), pages 905-27, July.
  25. Diebold, Francis X & Gunther, Todd A & Tay, Anthony S, 1998. "Evaluating Density Forecasts with Applications to Financial Risk Management," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(4), pages 863-83, November.
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