Econometric modelling of the time between financial trades

Project: Project funded by Hanken/Hanken funds

Project Details

Description

The financial market microstructure literature analyzes the detailed behaviour of buyers and sellers under specific trading mechanisms and hence the formation of prices, traded quantities etcetera. The rise in availability of high-frequency and ultra-high frequency data has brought with it new developments in financial econometrics (e.g. Tsay 2009, Meitz and Teräsvirta 2006, Hautsch 2012). A new tide within market microstructure was initiated by Engle and Russell (1998) by modeling the time between events on a financial market with the so called Autoregressive Conditional Duration (ACD) model. We will apply the ACD model and generalizations of it to data from the Helsinki Stock Exchange, evaluate the fit of the models and perform tests of hypotheses from market microstructure theory. Existing approaches to model the time between financial transactions will be evaluated and extended. At the moment this work is done with research assistant Markus Belfrage at Hanken’s Department of Finance and Statistics. We have developed computational routines for estimation and testing of the ACD-model and various variants of it (e.g. tests presented by Meitz and Teärsvirta 2006).
StatusFinished
Effective start/end date01.06.201431.12.2019