HIGH-FREQUENCY TRANSACTION DATA: A COMPARISON BETWEEN TWO ASYMMETRIC MODELS
Abstract
This paper compares two asymmetric market microstructure models, namely, the three-state asymmetric autoregressive conditional duration (AACD) model and the activity-direction-size (ADS) model. It is shown that the two models measure different aspects of the same underlying asymmetric nature of market microstructure. It is also shown that by extending the AACD model to include two size variables and adjusting for partial durations, each model’s parameter estimates can be used to estimate the other model’s parameters exactly. Thus, the two asymmetric market microstructure models are equivalent.
Downloads
Copyright (c) 2023 Michael Kunkler
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.
Authors submitting articles for publication warrant that the work is not an infringement of any existing copyright and will indemnify the publisher against any breach of such warranty. By publishing in Applied Finance Letters, the author(s) retain copyright but agree to the dissemination of their work through Applied Finance Letters.
By publishing in Applied Finance Letters, the authors grant the Journal a Creative Commons nonexclusive worldwide license (CC-BY-NC-ND: Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License) for electronic dissemination of the article via the Internet, and, a nonexclusive right to license others to reproduce, republish, transmit, and distribute the content of the journal. The authors grant the Journal the right to transfer content (without changing it), to any medium or format necessary for the purpose of preservation.
Authors agree that the Journal will not be liable for any damages, costs, or losses whatsoever arising in any circumstances from its services, including damages arising from the breakdown of technology and difficulties with access.
