The impact of transaction duration, volume and direction on price dynamics and volatility

• Main Authors: TAY, Anthony S., TING, Christopher, TSE, Yiu Kuen, WARACHKA, Mitchell
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2011
• Subjects: Econometric theory; Applied econometrics; Econometrics of financial markets; Forecasting ability; Finance; Finance and Financial Management
• Online Access: https://ink.library.smu.edu.sg/soe_research/1381; https://ink.library.smu.edu.sg/context/soe_research/article/2380/viewcontent/ImpactTransactionDurationVolumeDirection_QF_2011.pdf
• Institution: Singapore Management University

We explore the role of trade volume, trade direction, and the duration between trades in explaining price dynamics and volatility using an Asymmetric Autoregressive Conditional Duration model applied to intraday transactions data. Our results suggest that volume, direction and duration are important determinants of price dynamics, while duration is also an important determinant of volatility. However, the impact of volume and direction on volatility is marginal after controlling for duration, and the impact of volume on volatility appears to be confined to periods of infrequent trading.