The Intraday Analysis of Volatility, Volume and Spreads: A Review with Applications to Futures Markets
FINANCIAL ECONOMETRICS MODELING: MARKET MICROSTRUCTURE, FACTOR MODELS AND FINANCIAL RISK MEASURES, pp. 92-131, Palgrave Macmillan, 2011
Posted: 31 Jan 2011
Date Written: January 30, 2011
The growing interest in financial markets microstructure and the fact that financial professionals have access to huge intraday databases have made high-frequency data modelling a hot issue in recent empirical finance literature. We analyse the main issues that are at stake when analysing intraday financial time series, with particular emphasis on the joint dynamics of volatility, volume and spreads. We review the main econometric models used for volatility analysis in an intraday environment which work with non equally spaced data and consider the whole information set provided by the market. Given the growing importance of tick by tick data analysis, we present an empirical application of ACD and Ordered Probit models to the Standard & Poor 500 and Nasdaq100 index futures’ data, and we point out the advantages and disadvantages of both approaches.
Keywords: Intraday Data, ACD, Ordered Probit, CME, SP500 Future, NASDAQ100 Future
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