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on Market Microstructure |
| By: | Nikolaus Hautsch (Humboldt University Berlin and CFS) |
| Abstract: | We introduce a multivariate multiplicative error model which is driven by componentspecific observation driven dynamics as well as a common latent autoregressive factor. The model is designed to explicitly account for (information driven) common factor dynamics as well as idiosyncratic effects in the processes of highfrequency return volatilities, trade sizes and trading intensities. The model is estimated by simulated maximum likelihood using efficient importance sampling. Analyzing five minutes data from four liquid stocks traded at the New York Stock Exchange, we find that volatilities, volumes and intensities are driven by idiosyncratic dynamics as well as a highly persistent common factor capturing most causal relations and cross-dependencies between the individual variables. This confirms economic theory and suggests more parsimonious specifications of high-dimensional trading processes. It turns out that common shocks affect the return volatility and the trading volume rather than the trading intensity. |
| Keywords: | Net Foreign Assets; Valuation Adjustment; International Financial Integration |
| JEL: | C15 C32 C52 |
| Date: | 2007–09–04 |
| URL: | http://d.repec.org/n?u=RePEc:cfs:cfswop:wp200725&r=mst |
| By: | Jérôme Lahaye; Sébastien Laurent; Christopher J. Neely |
| Abstract: | We analyze and assess the impact of macroeconomic announcements on the discontinuities in many assets: stock index futures, bond futures, exchange rates, and gold. We use bi-power variation and the recently proposed non-parametric techniques of Lee and Mykland (2006) to extract jumps. Beyond characterizing the jump and cojump dynamics of many assets, we analyze how news arrival causes jumps and cojumps and estimate limited-dependent-variable models to quantify the impact of surprises. We confirm previous findings that some surprises create jumps. However, many announce-ments do not create jumps and many jumps are not related to announcements. The propensity of surprises to create jumps differs across asset classes, i.e., exchange rates, bonds, stock index. Payroll announcements are most important on stocks and bonds futures markets. Trade related news often creates cojumps on exchange rate markets. |
| Keywords: | Foreign exchange rates ; Bond market |
| Date: | 2007 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedlwp:2007-032&r=mst |