This paper implements the Asymmetric AutoregressiveConditional Duration (AACD) model of Bauwens and Giot (2003) to analyzeirregularly spaced transaction data of trade direction, namely buy versus sellorders. We examine the influence of lagged transaction duration, lagged volumeand lagged trade direction on transaction duration and direction. Our resultsare applied to estimate the probability of informed trading (PIN) based on theEasley, Hvidkjaer and O’Hara (2002) framework. Unlike the Easley-Hvidkjaer-O’Hara model, which uses the daily aggregate number of buy and sellorders, the AACD model makes full use of transaction data and allows forinteractions between buy and sell orders.
Singapore Management University
City or Country
TAY, Anthony S.; TING, Christopher; TSE, Yiu Kuen; and WARACHKA, Mitch.
Modeling transaction data of trade direction and estimation of probability of informed trading. (2007). Research Collection School Of Economics.
Available at: http://ink.library.smu.edu.sg/soe_research/1899
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