Modeling the interdependence of volatility and inter-transaction duration processes
(2002) Journal of Econometrics — Vol. 106, n° 2, p. 369-400 (2002)
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- This paper develops an approach for modeling the interdependence of intra-day volatility and trade duration processes, and extends the recursive specifications that have recently been proposed in the literature. We propose a suitable GMM estimation strategy that includes straightforward estimation of the autoregressive conditional duration model. A Monte Carlo study examines the performance of the estimation method. The empirical work investigates the impact of volatility on transaction intensity in the secondary equity market after a large initial public offering. We find that lagged volatility significantly reduces transaction intensity, which is consistent with predictions from microstructure theory. (C) 2002 Elsevier Science S.A. All rights reserved.
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Grammig, J., & Wellner, M. (2002). Modeling the interdependence of volatility and inter-transaction duration processes. Journal of Econometrics, 106(2), 369-400. https://doi.org/10.1016/S0304-4076(01)00105-1 (Original work published 2002)