Modelling security market events in continuous time: Intensity based,multivariate point process models |
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Authors: | Clive G. Bowsher |
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Affiliation: | Nuffield College, University of Oxford, New Road, Oxford, OX1 1NF, UK |
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Abstract: | A continuous time econometric modelling framework for multivariate financial market event (or ‘transactions’) data is developed in which the model is specified via the vector conditional intensity. Generalised Hawkes models are introduced that incorporate inhibitory events and dependence between trading days. Novel omnibus specification tests based on a multivariate random time change theorem are proposed. A bivariate point process model of the timing of trades and mid-quote changes is then presented for a New York Stock Exchange stock and related to the market microstructure literature. The two-way interaction of trades and quote changes in continuous time is found to be important empirically. |
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Keywords: | C32 C51 C52 G10 |
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