| Abstract: |
This thesis comprises four papers concerning trade durations and limit order
book information. Paper [1], [2] and [4] study trader durations, e.g., the
time between stock transactions in intra-day data. Paper [3] focus on the
information content in the limit order book concerning future price movements
in stock transaction data. <p> Paper [1] considers conditional duration models
in which durations are in continuous time but measured in grouped or
discretized form. This feature of recorded durations in combination with a
frequently traded stock is expected to negatively influence the performance of
conventional estimators for intraday duration models. A few estimators that
account for the discreteness are discussed and compared in a Monte Carlo
experiment. An EM-algorithm accounting for the discrete data performs better
than those which do not. Empirically, the incorporation of level variables for
past trading is rejected in favour of change variables. This enables an
interpretation in terms of news effects. No evidence of asymmetric responses
to news about prices and spreads is found. <p> Paper [2] considers an
extension of the univariate autoregressive conditional duration model to which
durations from a second stock are added. The model is empirically used to
study duration dependence in four traded stocks, Nordea, Föreningssparbanken,
Handelsbanken and SEB A on the Stockholm Stock Exchange. The stocks are all
active in the banking sector. It is found that including durations from a
second stock may add explanatory power to the univariate model. We also find
that spread changes have significant effect for all series. <p> Paper [3]
empirically tests whether an open limit order book contains information about
future short-run stock price movements. To account for the discrete nature of
price changes, the integer-valued autoregressive model of order one is
utilized. A model transformation has an advantage over conventional count data
approaches since it handles negative integer-valued price changes. The
empirical results reveal that measures capturing offered quantities of a share
at the best bid- and ask-price reveal more information about future short-run
price movements than measures capturing the quantities offered at prices below
and above. Imbalance and changes in offered quantities at prices below and
above the best bid- and askprice do, however, have a small and significant
effect on future price changes. The results also indicate that the value of
order book information is short-term. <p> Paper [4] This paper studies the
impact of news announcements on trade durations in stocks on the Stockholm
Stock Exchange. The news are categorized into four groups and the impact on
the time between transactions is studied. Times before, during and after the
news release are considered. Econometrically, the impact is studied within an
autoregressive conditional duration model using intradaily data for six
stocks. The empirical results reveal that news reduces the duration lengths
before, during and after news releases as expected by the theoretical
litterature on durations and information flow. |