How to Match Trades and Quotes for Nyse Stocks?

Olivier Vergote

Working Papers of Department of Economics, Leuven from KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven

Abstract: This paper proposes a new procedure to determine the time of the prevailing quote relative to the time of the trade for NYSE stock data obtained from the TAQ database. The procedure tests whether the quote revision frequency around a trade is contaminated by quote revisions triggered by a trade, and then determines the smallest timing adjustment needed to eliminate this contamination. An application to various stocks and sample periods shows that the time difference between trade and quote reporting lags varies across stocks and time. The procedure takes this variation into account and hence offers a stock- and time-specific update to the Lee and Ready (1991) 5-second rule.

Date: 2005-03
New Economics Papers: this item is included in nep-fmk and nep-mst
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Persistent link: https://EconPapers.repec.org/RePEc:ete:ceswps:ces0510

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