Modelling Trade-by-Trade Price Movements of Multiple Assets Using Multivariate Compound Poisson Processes
19 Pages Posted: 23 Sep 1999
Date Written: June 1999
In this paper we extend Rydberg-Shephard's activity, direction and size decomposition of trade-by-trade price movements to the multivariate case. We illustrate our ideas using a bivariate modelling problem --- modelling the evolution of the prices of Ford and GM shares. Throughout we use the continuous record of trades made in the first five months of 1997 on the New York Stock Exchange (NYSE).
JEL Classification: G12
Suggested Citation: Suggested Citation