Modelling Intraday Trading Activity Using Box-Cox ACD Models

25 Pages Posted: 8 Nov 2001  

Nikolaus Hautsch

University of Vienna - Department of Statistics and Operations Research; Center for Financial Studies (CFS)

Date Written: October 2001

Abstract

In this paper, I model the intraday trading activity based on volume durations, i.e. the waiting time until a predetermined volume is absorbed by the market. Since this concept measures the trading volume per time it is strongly related to market liquidity. I focus on volumes measured independently of the side of the market as well as on buy volumes, sell volumes and volumes measured on both market sides simultaneously. For econometric modelling of the different duration concepts, the performance of alternative types of Box-Cox-ACD models are analyzed. By evaluating out-of-sample forecasts, evidence is provided that Box-Cox-ACD models are a valuable tool for predicting volume durations. It is shown that volume durations measured independently of the side of the market have the best predictability. Furthermore, I illustrate that the inclusion of explanatory variables capturing past market activities concerning the price process and imbalances between the buy and sell side of the market. The empirical study uses IBM transaction data from the NYSE.

Keywords: volume durations, liquidity concepts, Generalized F distribution, out-of-sample-forecasts

JEL Classification: C22, C41, G14

Suggested Citation

Hautsch, Nikolaus, Modelling Intraday Trading Activity Using Box-Cox ACD Models (October 2001). Available at SSRN: https://ssrn.com/abstract=289643 or http://dx.doi.org/10.2139/ssrn.289643

Nikolaus Hautsch (Contact Author)

University of Vienna - Department of Statistics and Operations Research ( email )

Oskar-Morgenstern-Platz 1
Vienna, A-1090
Austria

Center for Financial Studies (CFS) ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

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