Improving VWAP. Strategies: A Dynamical Volume Approach

61 Pages Posted: 28 Sep 2006 Last revised: 23 Feb 2018

Jedrzej Pawel Bialkowski

University of Canterbury - Department of Economics and Finance

Serge Darolles

Université Paris Dauphine - DRM-CEREG

Gaëlle Le Fol

Université Paris-Dauphine, PSL Research University, CNRS, UMR 7088, DRM, Finance, 75016 Paris, France; National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST)

Date Written: June 2006

Abstract

In this paper, we present a new methodology for modelling intraday volume, which allows for a reduction of the execution risk in VWAP (Volume Weighted Average Price) orders. The results are obtained for all the stocks included in the CAC40 index at the beginning of September 2004. The idea of considered models is based on the decomposition of traded volume into two parts: one reflects volume changes due to market evolution; the second describes the stock specific volume pattern. The dynamic of the specific volume part is depicted by ARMA and SETAR models. The implementation of VWAP strategies allows some dynamic adjustments during the day in order to improve tracking of the end-of-day VWAP.

Keywords: Intraday volume; Factor models; Volume Weighted Average Price; VWAP strategies

JEL Classification: C53, G12, G29

Suggested Citation

Bialkowski, Jedrzej Pawel and Darolles, Serge and Le Fol, Gaëlle, Improving VWAP. Strategies: A Dynamical Volume Approach (June 2006). Journal of Banking and Finance, Vol. 32, 2008. Available at SSRN: https://ssrn.com/abstract=932699 or http://dx.doi.org/10.2139/ssrn.932699

Jedrzej Pawel Bialkowski (Contact Author)

University of Canterbury - Department of Economics and Finance ( email )

Private Bag 4800
Christchurch
New Zealand

Serge Darolles

Université Paris Dauphine - DRM-CEREG ( email )

place du Maréchal de Lattre de Tassigny
cedex 16
Paris, 75775
France

Gaëlle Le Fol

Université Paris-Dauphine, PSL Research University, CNRS, UMR 7088, DRM, Finance, 75016 Paris, France ( email )

Place du Maréchal de Lattre de Tassigny
Paris Cedex 16, 75775
France

National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST) ( email )

15 Boulevard Gabriel Peri
Malakoff Cedex, 1 92245
France

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