Analyzing the Time between Trades with a Gamma Compounded Hazard Model. An Application to LIFFE Bund Future Transactions
This paper investigates the time between transactions on financial markets. It is assumed that the interval between transactions is a random variable and the relationship between the probability to observe a transaction at each instant of time and the type of the previous trade is investigated. To estimate these effects, a semiparametric proportional hazard model is used which is based on approaches proposed by Han and Hausman (1990) and Meyer (1990). Considering grouped durations the log-likelihood is formed by using differences in the survivor function. Hence, the model corresponds to an ordered response approach whereby the baseline hazard is estimated simultaneously with the coefficients of the covariates and is calculated by the thresholds. Clustering of the durations is taken into account by including lagged durations. A test is proposed to check for serial correlation in the errors based on the concept of generalized residuals along the lines of the work of Gourieroux, Monfort and Trognon (1987). Unobservable heterogeneity is implemented parametrically by a gamma distributed random variable entering the hazard function. It is shown that the resulting compounded model follows a BurrII form. In an empirical analysis high frequency intraday transaction data from the London International Financial Futures and Options Exchange (LIFFE) is investigated.
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.:
- Meyer, Bruce D, 1990.
"Unemployment Insurance and Unemployment Spells,"
Econometric Society, vol. 58(4), pages 757-782, July.
- Bruce D. Meyer, 1988. "Unemployment Insurance And Unemployment Spells," NBER Working Papers 2546, National Bureau of Economic Research, Inc.
- Aitken, Michael & Brown, Philip & Buckland, Christine & Izan, H. Y. & Walter, Terry, 1996. "Price clustering on the Australian Stock Exchange," Pacific-Basin Finance Journal, Elsevier, vol. 4(2-3), pages 297-314, July.
- T. Addison, John & Portugal, Pedro, 1998. "Some specification issues in unemployment duration analysis," Labour Economics, Elsevier, vol. 5(1), pages 53-66, March.
- Kiefer, Nicholas M, 1988. "Economic Duration Data and Hazard Functions," Journal of Economic Literature, American Economic Association, vol. 26(2), pages 646-679, June.
- Madhavan, Ananth & Richardson, Matthew & Roomans, Mark, 1997. "Why Do Security Prices Change? A Transaction-Level Analysis of NYSE Stocks," Review of Financial Studies, Society for Financial Studies, vol. 10(4), pages 1035-1064.
- Ananth Madhavan & Matthew Richardson & Mark Roomans, "undated". "Why Do Security Prices Change? A Transaction-Level Analysis of NYSE Stocks," Rodney L. White Center for Financial Research Working Papers 20-94, Wharton School Rodney L. White Center for Financial Research.
- Ananth Madhavan & Matthew Richardson & Mark Roomans, 1996. "Why Do Security Prices Change? A Transaction-Level Analysis of NYSE Stocks," New York University, Leonard N. Stern School Finance Department Working Paper Seires 96-34, New York University, Leonard N. Stern School of Business-.
- Richard B. Olsen & Ulrich A. Müller & Michel M. Dacorogna & Olivier V. Pictet & Rakhal R. Davé & Dominique M. Guillaume, 1997. "From the bird's eye to the microscope: A survey of new stylized facts of the intra-daily foreign exchange markets (*)," Finance and Stochastics, Springer, vol. 1(2), pages 95-129.
- Andersen, Torben G. & Bollerslev, Tim, 1997. "Intraday periodicity and volatility persistence in financial markets," Journal of Empirical Finance, Elsevier, vol. 4(2-3), pages 115-158, June.
- 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.
- Lawrence R. Glosten & Paul R. Milgrom, 1983. "Bid, Ask and Transaction Prices in a Specialist Market with Heterogeneously Informed Traders," Discussion Papers 570, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Han, Aaron & Hausman, Jerry A, 1990. "Flexible Parametric Estimation of Duration and Competing Risk Models," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 5(1), pages 1-28, January-M.
- repec:adr:anecst:y:2000:i:60:p:04 is not listed on IDEAS
- Robert F. Engle & Asger Lunde, 2003. "Trades and Quotes: A Bivariate Point Process," Journal of Financial Econometrics, Society for Financial Econometrics, vol. 1(2), pages 159-188.
- Engle, Robert F & Lunde, Asger, 1998. "Trades and Quotes: A Bivariate Point Process," University of California at San Diego, Economics Working Paper Series qt8bh079sq, Department of Economics, UC San Diego.
- Anat R. Admati, Paul Pfleiderer, 1988. "A Theory of Intraday Patterns: Volume and Price Variability," Review of Financial Studies, Society for Financial Studies, vol. 1(1), pages 3-40.
- Serge Darolles & Christian Gouriéroux & Gaëlle Le Fol, 2000. "Intraday Transaction Price Dynamics," Annals of Economics and Statistics, GENES, issue 60, pages 207-238.
- Gaëlle Le Fol & Serge Darolles & Christian Gourieroux, 1999. "Intraday Transaction Price Dynamics," Post-Print halshs-00536272, HAL.
- Robert F. Engle & Jeffrey R. Russell, 1998. "Autoregressive Conditional Duration: A New Model for Irregularly Spaced Transaction Data," Econometrica, Econometric Society, vol. 66(5), pages 1127-1162, September.
- Heckman, James J. & Singer, Burton, 1984. "Econometric duration analysis," Journal of Econometrics, Elsevier, vol. 24(1-2), pages 63-132.
- Easley, David & O'Hara, Maureen, 1987. "Price, trade size, and information in securities markets," Journal of Financial Economics, Elsevier, vol. 19(1), pages 69-90, September.
- Moffitt, Robert, 1985. "Unemployment insurance and the distribution of unemployment spells," Journal of Econometrics, Elsevier, vol. 28(1), pages 85-101, April.
- Goodhart, Charles A. E. & O'Hara, Maureen, 1997. "High frequency data in financial markets: Issues and applications," Journal of Empirical Finance, Elsevier, vol. 4(2-3), pages 73-114, June.
- Gourieroux Christian & Monfort Alain & Trognon A, 1984. "General approach of serial correlation (a)," CEPREMAP Working Papers (Couverture Orange) 8424, CEPREMAP.
- Honore, Bo E, 1990. "Simple Estimation of a Duration Model with Unobserved Heterogeneity," Econometrica, Econometric Society, vol. 58(2), pages 453-473, March.
- Christophe Bisière & Thierry Kamionka, 2000. "Timing of Orders, Order Aggressiveness and the Order Book at the Paris Bourse," Annals of Economics and Statistics, GENES, issue 60, pages 43-72.
- Kyle, Albert S, 1985. "Continuous Auctions and Insider Trading," Econometrica, Econometric Society, vol. 53(6), pages 1315-1335, November.
- Blume, Lawrence & Easley, David & O'Hara, Maureen, 1994. " Market Statistics and Technical Analysis: The Role of Volume," Journal of Finance, American Finance Association, vol. 49(1), pages 153-181, March.
- Lancaster, Tony, 1979. "Econometric Methods for the Duration of Unemployment," Econometrica, Econometric Society, vol. 47(4), pages 939-956, July.
- Bollerslev, Tim & Domowitz, Ian, 1993. " Trading Patterns and Prices in the Interbank Foreign Exchange Market," Journal of Finance, American Finance Association, vol. 48(4), pages 1421-1443, September.
- repec:adr:anecst:y:2000:i:60:p:03 is not listed on IDEAS
- 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. Full references (including those not matched with items on IDEAS)