Improving VWAP. Strategies: A Dynamical Volume Approach
61 Pages Posted: 28 Sep 2006 Last revised: 23 Feb 2018
Date Written: June 2006
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: Suggested Citation