New Economics Papers
on Market Microstructure
Issue of 2012‒01‒25
two papers chosen by
Thanos Verousis

  1. An Analysis of Intraday Patterns and Liquidity on the Istanbul Stock Exchange By Köksal, Bülent
  2. Multistate asymmetric ACD model: an application to order dynamics in the EUR/PLN spot market By Katarzyna Bień-Barkowska

  1. By: Köksal, Bülent
    Abstract: We analyze different dimensions of liquidity on the Istanbul Stock Exchange (ISE) by using detailed order and transaction data for all ISE stocks. We estimate the limit order book on the ISE at each point in time and examine the intraday behavior of spreads, depths, returns and volume. We find that the spreads follow an L-shaped pattern whereas returns, number of trades and volume follow a U-shaped pattern. Means of these liquidity variables are significantly different for different time intervals in a given day. Another result is that traders use spreads and depths simultaneously to implement their strategies, i.e., wide spreads are accompanied by low depths and vice versa. We also find that spreads are higher on average for more risky stocks and for more active stocks. Measure of information flow as signaled by trades of unusual size causes the spreads to increase. Finally there are day-of-week effects on spreads, returns and share volume.
    Keywords: Intraday Patterns; Spreads; Returns; Depths; Transaction Volume; Market Liquidity; Limit Order Market; Istanbul Stock Exchange
    JEL: G15 G20
    Date: 2012–01
  2. By: Katarzyna Bień-Barkowska (National Bank of Poland, Financial System Department; Warsaw School of Economics, Institute of Econometrics)
    Abstract: This paper examines a process of order submissions and cancellations in the interbank order driven market of the EUR/PLN currency pair. Our contribution to the existing literature is twofold. We generalize the Asymmetric ACD model (AACD) of Bauwens & Giot (2003) with respect to more than two competing risks. It results in the flexible multistate econometric model for durations between moments in which order submissions or cancellations take place. Thanks to the Multistate AACD model we are able to examine timing of order submissions/cancellations that (1) take place on different sides of the market and (2) vary according to the level of order aggressiveness. We show how to simulate from the proposed Multistate Asymmetric ACD model, which enables us to study the transition probabilities between selected events. We investigate different market microstructure factors that exert an influence on the intraday pattern of order submission or cancellation strategies.
    Keywords: asymmetric ACD model, order dynamics, intraday liquidity
    JEL: G10 F30 C30
    Date: 2011

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