The Econometrics of Sequential Trade Models: Theory and Applications Using High Frequency Data (Paperback, 2004)

1 Introduction.- 2 Trading Mechanisms on Financial Markets.- 2.1 Typology of Security Markets.- 2.2 Market Participants and Institutional Setup on the NYSE.- 2.2.1 Market Participants.- 2.2.2 Handling of Orders and Execution.- 2.2.3 Order Routing and Information Systems.- 3 Sequential Trade Models.- 3.1 Market Microstructure Theory.- 3.2 Microstructure Models of the Black Box under Asymmetric Information.- 3.2.1 Sequential Trade Models.- 3.2.2 Walrasian Batch Models.- 3.2.3 Critical Assessment.- 3.3 The Basic Sequential Trade Model.- 3.4 Extensions.- 3.4.1 Trade Size Effects, No-Trading Events, and History Dependence.- 3.4.2 Discriminating Between Market and Limit Orders.- 3.4.3 Models for Dually Listed Assets.- 3.5 Estimation of Structural Models.- 3.5.1 Estimation of the Basic Model Using Information on Buys and Sells.- 3.5.2 Estimation of the Basic Model Using Information on Trades.- 3.5.3 Estimation of Related Models.- 3.6 Results of Previous Studies.- 4 Econometric Analysis of Sequential Trade Models.- 4.1 The EKOP Model and Finite Mixture Models.- 4.1.1 Motivation.- 4.1.2 An Alternative Version of the EKOP Model.- 4.1.3 A Multivariate Finite Mixture Poisson Regression Model.- 4.1.4 A Mixture Regression Model Based on the Negative Binomial Distribution.- 4.1.5 Accounting for Intraday Seasonality.- 4.1.6 Autoregressive Specification of the Conditional Mean Function.- 4.1.7 A Markov Switching Approach.- 4.2 Model Evaluation and Specification Testing.- 4.2.1 Specification Tests in Static Mixture and Markov Switching Models.- 4.2.2 Determining the Number of Regimes.- 4.2.3 A Conditional Moment Test for Goodness of Fit.- 4.2.4 Testing Parameter Restrictions.- 4.2.5 Testing for Autocorrelation.- 4.3 Mixture and Regime Switching Models in Econometrics.- 5 Empirical Results.- 5.1 The TAQ Database.- 5.2 The Trade Direction.- 5.2.1 Algorithms for the Determination of the Trade Direction.- 5.2.2 Empirical Evidence on the Accuracy of Classification.- 5.2.3 Classification of Trades.- 5.3 Descriptive Statistics.- 5.4 Estimation Results.- 5.4.1 Model Selection.- 5.4.2 Parameter Estimates.- 5.4.3 Specification Tests.- 5.4.4 Classification of Regimes.- 5.4.5 Testing Parameter Restrictions.- 6 Conclusions.- A.l The Poisson Process.- A.2 Maximum Likelihood Estimation of a Multivariate Poisson Mixture Model.- A.3 The EM-Algorithm.- A.4 The Poisson Regression Model.- A.5 The Negative Binomial Regression Model.- A.6 Moments of Mixture Distributions.- A.7 Unobserved Individual Variation of Trade Arrival Rates.- A.8 Markov Chains.- A.9 The Smoothing Algorithm.- A.1O Estimation of Transition Probabilities in the Markov Switching Model.- A.11 Moments of the Dependent Variable in a Markov Switching Model.- References.- List of Figures.- List of Tables.