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Intraday volatility, trading volume and trading intensity in the interbank market e-MID

Author

Listed:
  • Markus Engler

    (University of Kassel)

  • Vahidin Jeleskovic

    (University of Kassel)

Abstract

We apply a multivariate multiplicative error model (MMEM) and investigate effects in the simultaneous processes of high-frequency return volatilities, trading volume, and trading intensities on the Italien Electronic Interbank Credit Market (e-MID). Analysing five minutes data from the Italian interbank market (e-MID), we found that volatilities, volumes and trading intensities on electronic Interbank Credit Market share strong causal relationship resulting in highly significant estimates of MMEM. In addition, we run several estimations to observe a change in the market behaviour of the e-MID during the last financial crisis. The main results of our study are the usability of high-frequency data models for the analysis of interbank credit market data. Moreover, we find out that changes in the market behaviour occur during the crisis. Before the financial crises, liquidity variables have a negative influence on the volatility, in contrast to the time period after the outbrake of the financial turmoil. To our best knowledge, our paper presents the first empirical application of MMEM to an interbank credit market.

Suggested Citation

  • Markus Engler & Vahidin Jeleskovic, 2016. "Intraday volatility, trading volume and trading intensity in the interbank market e-MID," MAGKS Papers on Economics 201648, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    • Handle: RePEc:mar:magkse:201648
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Multiplicative error models; interbank markets; e-MID; interstate volatility; trading intensity; intraday trading process; high-frequency financial data;
    All these keywords.

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • C55 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Large Data Sets: Modeling and Analysis
    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • G01 - Financial Economics - - General - - - Financial Crises
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates

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