The Logarithmic Acd Model: An Application to the Bid-Ask Quote Process of Three NYSE Stocks

Abstract

This paper introduces the logarithmic autoregressive conditional duration (Log-ACD) model and compares it with the ACD model of ENGLE and RUSSELL [1998]. The logarithmic version allows to introduce in the model additional variables without sign restrictions on their coefficients. We apply the Log-ACD model to price durations relative to the bid-ask quote process of three securities listed on the New York Stock Exchange, and we investigate the influence of some characteristics of the trade process (trading intensity, average volume per trade and average spread) on the bid-ask quote process.

Keywords: duration, high frquency data, liquidity, market microstructure

JEL Classification: C10, C41, G10