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Zbl 1040.62094
Grammig, Joachim; Wellner, Marc
Modeling the interdependence of volatility and inter-transaction duration processes. (English)
[J] J. Econom. 106, No. 2, 369-400 (2002). ISSN 0304-4076

Summary: This paper develops an approach for modeling the interdependence of intra-day volatility and trade duration processes, and extends the recursive specifications that have recently been proposed in the literature. We propose a suitable GMM estimation strategy that includes straightforward estimation of the autoregressive conditional duration model. A Monte Carlo study examines the performance of the estimation method. The empirical work investigates the impact of volatility on transaction intensity in the secondary equity market after a large initial public offering. We find that lagged volatility significantly reduces transaction intensity, which is consistent with predictions from microstructure theory.

MSC 2000:: *62P05 Appl. of statistics to actuarial sciences and financial mathematics
62M10 Time series, etc. (statistics)
65C05 Monte Carlo methods

Keywords: inter-trade duration and volatility; financial market microstructure; ultra-high-frequency data

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