Go with the Flow: A GAS Model For Predicting Intra-Daily Volume Shares

19 Pages Posted: 11 Dec 2013

See all articles by Francesco Calvori

Francesco Calvori

University of Florence - Dipartimento di Statistica, Informatica, Applicazioni (DiSIA)

Fabrizio Cipollini

Universita di Firenze, DiSIA (Dipartimento di Statistica, Informatica, Applicazioni)

Giampiero M. Gallo

Universita' di Firenze - Dipartimento di Statistica, Informatica, Applicazioni "G.Parenti"

Date Written: November 22, 2013

Abstract

The Volume Weighted Average Price (VWAP) mixes volumes and prices at intra-daily intervals and is a benchmark measure frequently used to evaluate a trader’s performance. Under suitable assumptions, splitting a daily order according to ex-ante volume predictions is a good strategy to replicate the VWAP. To bypass possible problems generated by local trends in volumes, we propose a novel Generalized Autoregressive Score (GAS) model for predicting volume shares (relative to the daily total), inspired by the empirical regularities of the observed series (intra-daily periodicity pattern, residual serial dependence). An application to six NYSE tickers confirms the suitability of the model proposed in capturing the features of intra-daily dynamics of volume shares.

Keywords: High Frequency Financial Data, Prediction, Trading Volumes, Volume Shares, VWAP, GAS

JEL Classification: C22, C52, C53

Suggested Citation

Calvori, Francesco and Cipollini, Fabrizio and Gallo, Giampiero M., Go with the Flow: A GAS Model For Predicting Intra-Daily Volume Shares (November 22, 2013). Available at SSRN: https://ssrn.com/abstract=2363483 or http://dx.doi.org/10.2139/ssrn.2363483

Francesco Calvori

University of Florence - Dipartimento di Statistica, Informatica, Applicazioni (DiSIA) ( email )

Viale Morgagni, 59
Florence, 50134
Italy

Fabrizio Cipollini

Universita di Firenze, DiSIA (Dipartimento di Statistica, Informatica, Applicazioni) ( email )

Viale Morgagni, 59
Florence, Florence 50134
Italy
+39 055 2751592 (Phone)
+39 055 4223560 (Fax)

Giampiero M. Gallo (Contact Author)

Universita' di Firenze - Dipartimento di Statistica, Informatica, Applicazioni "G.Parenti" ( email )

Viale G.B. Morgagni, 59
Florence, 50134
Italy
0039 055 2751 591 (Phone)
0039 055 4223560 (Fax)

HOME PAGE: http://www.disia.unifi.it/gallog

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