Zhicheng Li, Haipeng Xing, Xinyun Chen
arXiv 2 Dec 2019 · Econometrics
arXiv:1912.00764 · PDF · DOI · OpenAlex · Extracted main text
This paper studies inter-trade durations in the NASDAQ limit order market and finds that inter-trade durations in ultra-high frequency have two modes. One mode is to the order of approximately 10^{-4} seconds, and the other is to the order of 1 second. This phenomenon and other empirical evidence suggest that there are two regimes associated with the dynamics of inter-trade durations, and the regime switchings are driven by the changes of high-frequency traders (HFTs) between providing and taking liquidity. To find how the two modes depend on information in the limit order book (LOB), we propose a two-state multifactor regime-switching (MF-RSD) model for inter-trade durations, in which the probabilities transition matrices are time-varying and depend on some lagged LOB factors. The MF-RSD model has good in-sample fitness and the superior out-of-sample performance, compared with some benchmark duration models. Our findings of the effects of LOB factors on the inter-trade durations help to understand more about the high-frequency market microstructure.
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The works this paper leans on most, across its whole bibliography — not restricted to papers in our corpus. Ranked by composite intensity, which combines how often a work is mentioned, how many sections mention it, and how much of that falls in the main text rather than the appendix.
| Reference | Intensity | Mentions | Sections | Main text | |
|---|---|---|---|---|---|
| 1 | Carrion, A (2013) Very fast money: High-frequency trading on the nasdaq | 1.000 | 6 | 3 | 100% |
| 2 | Engle, R. F. and J. R. Russell (1998) Autoregressive conditional duration: a new model for irregularly spaced transaction data | 0.928 | 4 | 4 | 100% |
| 3 | Chen, F., F. X. Diebold, and F. Schorfheide (2013) A markov-switching multifractal inter-trade duration model, with application to us equities | 0.843 | 3 | 3 | 100% |
| 4 | Li, M., T. McCormick, and X. Zhao (2005) Order imbalance and liquidity supply: Evidence from the bubble burst of nasdaq stocks | 0.737 | 3 | 2 | 100% |
| 5 | Goldstein, M. A., A. Kwan, and R. Philip (2018) High-frequency trading strategies | 0.737 | 3 | 2 | 100% |
| 6 | Hasbrouck, J (1991) Measuring the information content of stock trades | 0.737 | 3 | 2 | 100% |
| 7 | Van Kervel, V. and A. J. Menkveld (2019) High-frequency trading around large institutional orders | 0.737 | 3 | 2 | 100% |
| 8 | Brogaard, J., T. Hendershott, and R. Riordan (2014) High-frequency trading and price discovery | 0.644 | 2 | 2 | 100% |
| 9 | Cartea, Á., R. Donnelly, and S. Jaimungal (2018) Enhancing trading strategies with order book signals | 0.644 | 2 | 2 | 100% |
| 10 | Cont, R., A. Kukanov, and S. Stoikov (2014) The price impact of order book events | 0.644 | 2 | 2 | 100% |
Showing the top 10 of 54 scored citations.