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Dynamics of trade-by-trade price movements: decomposition and models

Abstract:

In this article we introduce a decomposition of the joint distribution of price changes of assets recorded trade-by-trade. Our decomposition means that we can model the dynamics of price changes using quite simple and interpretable models which are easily extended in a great number of directions, including using durations and volume as explanatory variables. Thus we provide an econometric basis for empirical work on market microstructure using time series of transaction data. We use maximum l...

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Publication status:
Published
Peer review status:
Peer reviewed

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Publisher copy:
10.1093/jjfinec/nbg002

Authors


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Institution:
BNP Paribas, London
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Institution:
University of Oxford
Research group:
Financial Economics; Econometrics;
Oxford college:
Nuffield College
Department:
Social Sciences Division - Economics
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Funding agency for:
Tina Hviid Rydberg
Publisher:
Oxford University Press Publisher's website
Journal:
Journal of Financial Econometrics Journal website
Volume:
1
Issue:
1
Pages:
2-25
DOI:
EISSN:
1479-8417
ISSN:
1479-8409
URN:
uuid:a6c8820c-3bee-42f2-be39-01b5bf2b124f
Local pid:
ora:2072

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