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Determinants of Inter-Trade Durations Using Proportional Hazard ARMA Models

Author

Listed:
  • Frank Gerhard

    (University of Konstanz)

  • Nikolaus Hautsch

    (University of Konstanz)

Abstract

This paper disseminates the survivor function of inter-trade durations as a key feature of the intraday trading process. It sheds light on the time varying trading intensity and, thus, liquidity of a traded asset and the information channels which propagate price signals among asymmetrically informed market participants. To obtain a consistent estimate of the baseline survivor function and capture well-known serial dependency in the trade intensity process as well we use a semiparametric proportional hazard model wich is augmented by an ARMA structure very similar to the obiquous ACD model. Based on transaction data from the DTB, Frankfurt, we find evidence that past sequences of prices and volumes have a significant impact on the trading intensity in accordance with theoretical models on the basis of rational expectations equilibria. However, we cannot find any evidence in favour of strategic behaviour with respect to the chosen transaction volume by informed traders. From an inspection of conditional failure probabilities we find weak evidence for the use of non-trading intervals as an indication for the absence of price information among market participants. However, this information content seems to be diluted by a high liquidity base level, particularly with respect to large inflow of traders of the U.S.~market.

Suggested Citation

  • Frank Gerhard & Nikolaus Hautsch, 2000. "Determinants of Inter-Trade Durations Using Proportional Hazard ARMA Models," Econometric Society World Congress 2000 Contributed Papers 1082, Econometric Society.
  • Handle: RePEc:ecm:wc2000:1082
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    References listed on IDEAS

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    1. Lee, Sang-Won & Hansen, Bruce E., 1994. "Asymptotic Theory for the Garch(1,1) Quasi-Maximum Likelihood Estimator," Econometric Theory, Cambridge University Press, vol. 10(1), pages 29-52, March.
    2. Gallant, A. Ronald, 1981. "On the bias in flexible functional forms and an essentially unbiased form : The fourier flexible form," Journal of Econometrics, Elsevier, vol. 15(2), pages 211-245, February.
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    Cited by:

    1. Iordanis Kalaitzoglou & Boulis Maher Ibrahim, 2010. "Does Order Flow in the European Carbon Allowances Market Reveal Information?," CFI Discussion Papers 1003, Centre for Finance and Investment, Heriot Watt University.
    2. Taylor, Nicholas, 2004. "Trading intensity, volatility, and arbitrage activity," Journal of Banking & Finance, Elsevier, vol. 28(5), pages 1137-1162, May.
    3. Kalaitzoglou, Iordanis & Ibrahim, Boulis M., 2013. "Does order flow in the European Carbon Futures Market reveal information?," Journal of Financial Markets, Elsevier, vol. 16(3), pages 604-635.

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