Market Microstructure Project.
Position | National Bureau of Economic Research conference papers - Industry Trend or Event - Critical Essay |
Members and guests of the Market Microstructure Project gathered in Cambridge on December 3 to discuss their recent research. The meeting was organized by Tim Bollerslev, NBER and Duke University; Eric Ghysels, Pennsylvania State University; Bruce Lehmann, University of California, San Diego; Andrew W. Lo, NBER and MIT; Matthew Spiegel, Yale University; and Avanidhar Subramanyam, University of California, Los Angeles. The following papers were presented:
Robert F. Engle, NBER and University of California, San Diego, and Asger Lunde, University of Aalborg, "Trades and Quotes: A Bivariate Point Process"
Discussant: S. Viswanathan, Duke University
Edith S. Hotchkiss, Boston College, and Tavy Ronen, Rutgers University, "The Informational Efficiency of the Corporate Bond Market: An Intraday Analysis"
Discussant: Arthur Warga, University of Houston
Michael A. Goldstein, University of Colorado, and Kenneth A. Kavajecz, University of Pennsylvania, "Liquidity Provision during Circuit Breakers and Extreme Market Movements"
Discussant: Maureen O'Hara, Cornell University
Martin D. D. Evans, Georgetown University, and Richard K. Lyons, NBER and University of California, Berkeley, "Order Flow and Exchange Dynamics" (NBER Working Paper No.7317)
Discussant: Francis X. Diebold, NBER and University of Pennsylvania
Tina Hviid Rydberg and Neil Shephard, Nuffield. College, "BIN Models for Trade-by-Trade Data: Modeling the Number of Trades in a Fixed Interval of Time"
Discussant: Ian Domowitz, Pennsylvania State University
Joel Hasbrouck, New York University, "Trading Fast and Slow: Security Market Events in Real Time"
Discussant: Jeffrey Russell, University of Chicago
Engle and Lunde formulate a process for jointly analyzing transactions and the arrivals of quotes. In microstructure models, transactions may reveal private information that is then incorporated into new prices. The authors examine the speed of this information flow and the circumstances that govern it. They estimate models of stock trades and quotes for eight different stocks. They find that, for the arrival of price quotes, information flow variables -- such as high transaction arrival rates, large volume per trade, and wide bid/ask spreads -- all predict more rapid price revisions. This means that prices respond more quickly to trades when information is flowing; the price impacts of trades, and ultimately the volatility of prices, are high in such circumstances. When quote arrivals are...
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