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Analyzing Liquidity and Absorption Limits of Electronic Markets with Volume Durations

[journal article]

Wing Lon Ng

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Abstract This paper focuses on the liquidity of electronic stock markets applying a sequential estimation approach of models for volume durations with increasing threshold values. A modified ACD model with a Box-Tukey transformation and a flexible generalized Beta distribution is proposed to capture the changing cluster structure of duration processes. The estimation results with the German XETRA data reveal the market’s absorption limit for high volumes of shares, expanding the time costs of illiquidity when trading these quantities.
Classification Financial Planning, Accountancy; Economic Statistics, Econometrics, Business Informatics
Method theory application
Free Keywords Financial econometrics; Econometric methods; Econometrics of financial markets; Copulas; Statistical methods; Financial time series; Market microstructure; Quantitative finance
Document language English
Publication Year 2008
Page/Pages p. 353-361
Journal Quantitative Finance, 8 (2008) 4
Status Postprint; peer reviewed
Licence PEER Licence Agreement (applicable only to documents from PEER project)