Econometric Modelling of Stock Market Intraday Activity

The recent widespread availability of intraday tick-by-tick databases for stocks, options and currencies has had an important impact on research in applied financial econometrics and market microstructure. This text focuses on the econometric modelling of intraday tick-by-tick transaction data (trades and quote) for stock traded on the New York Stock Exchange (NYSE). Quantitative modelling tools such as intraday duration models and GARCH modes are presented. A survey of trading mechanisms in financial markets and a review of market microstructure issues is also included, which allows to gain a better understanding of the motivation underlying the use of the quantitative models. In the empirical applications, the link is made with the models of the market microstructure literature that have proposed an explicit treatment of time in the trading process. Other empirical applications deal with the modelling of intraday volatility and intraday Value-at-Risk. Although the models are applied to data for stock traded on the NYSE, they are not specific to this exchange and could be used to analyze other existing trading mechanisms. Accordingly, this book should be of interest to academics and graduate students involved in empirical finance and applied econometrics, regulators working for exchanges, and practitioners in banks or brokerage firms.