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“Testing for private information using trade duration models with unobserved market heterogeneity: The case of Banco Popular”

Author

Listed:
  • Jorge Pérez-Rodríguez

    (Department of Quantitative Methods. University of Las Palmas de Gran Canaria, Spain.)

  • Emilio Gómez-Déniza

    (Department of Quantitative Methods. TiDES Institute. University of Las Palmas de Gran Canaria, Spain.)

  • Simón Sosvilla-Rivero

    (Complutense Institute for Economic Analysis, Universidad Complutense de Madrid.)

Abstract

In this paper, we attempt to assess the potential importance of different types of traders (i.e., those with public and private information) in financial markets using a specification of the standardized duration. This approach allows us to test unobserved heterogeneity in a nonlinear version based on a self-exciting threshold autoregressive conditional duration model. We illustrate the relevance of this procedure for identifying the presence of private information in the final days of trading of Banco Popular, the first bank rescued by the European Single Resolution Board.

Suggested Citation

  • Jorge Pérez-Rodríguez & Emilio Gómez-Déniza & Simón Sosvilla-Rivero, 2019. "“Testing for private information using trade duration models with unobserved market heterogeneity: The case of Banco Popular”," IREA Working Papers 201907, University of Barcelona, Research Institute of Applied Economics, revised Apr 2019.
    • Handle: RePEc:ira:wpaper:201907
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    References listed on IDEAS

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    More about this item

    Keywords

    Conditional duration; threshold models; finite and infinite mixtures; private information; bank failure. JEL classification:C22; C41; D53; D82; G10; G12; G14.;
    All these keywords.

    JEL classification:

    • C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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