HIGH-FREQUENCY TRANSACTION DATA: A COMPARISON BETWEEN TWO ASYMMETRIC MODELS
Abstract
This paper compares two asymmetric models for high-frequency transaction data in financial markets, namely, the three-state Asymmetric Autoregressive Conditional Duration (AACD) model and the Activity Direction Size (ADS) model. It is shown that the two asymmetric models measure different aspects of the same underlying asymmetric nature of high-frequency transaction data. 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 models are equivalent, and measure the durations and price changes jointly.
Keywords: High-frequency transaction data
JEL: G15
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