The logarithmic ACD model: an application to market microstructure and NASDAQ

Luc Bauwens and Pierre Giot

No 1997089, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: This paper introduces the logarithmic autoregressive conditional duration model (Log-ACD model). The logarithmic version allows for more flexibility than the ACD model of Engle and Russel (1995), when additional variables are included in the model. We apply the Log-ACD model to bid/ask prices relative to securities listed on the NASDAQ and investigate the way market makers revise their beliefs on these bid and ask prices. The updating behavior of the market makers is closely linked to the evolution of the liquidity of the market over the trading day.

Keywords: Duration; High frequency data; Liquidity; Market microstructure; NASDAQ (search for similar items in EconPapers)
JEL-codes: C10 C41 G10 (search for similar items in EconPapers)
Date: 1997-11-01
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:cor:louvco:1997089

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