CONSIDERING MARKET MICRO STRUCTURE AT SEVEN US STOCK EXCHANGE A METHODOLOGICAL NOTE

Aleksandar Sevic, Chandra Sekhar Krishnanmurti and Zeljko Sevic
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Zeljko Sevic: Greenwich University london

IBT Journal of Business Studies (JBS), 2005, vol. 1, issue 2, 99-126

Abstract: This article questions the validity of regression models when high comrelations exist between independent vanables and presents the application of VAR as an altemative technique through the coparison of two groups of selected stocks that represent components of Dow Jones and S&P 500 indices, respectively 1he results indicate that panel regressions face serious specification problenms while the impulse response function underlines that the shock to the volume innovation has a mostly positive impact on the volatility in both S&P and Dow Jones sample, but the tendency cannot be casily accounted for.The positive impact of volatiy shocks on the intermarsctuepin is atner uncKpected but it may be associated with an increase in volume that docs not enormously cnhance the spread up to the point where it will be too costly for marketmakerS to trade, and accordingly, quickiy arows the spreadd to absorb new liquidity influx in the market In the Cranger causality tests Dow Jones stocks with comparatively larger average volume, depth values and price eves provide sughtly sronger relations between analyzed variables compared to the stocks ineluded in the S&P sample

Keywords: Volatility; Market Depth; Volume; Correlation Matrix (search for similar items in EconPapers)
Date: 2005
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Persistent link: https://EconPapers.repec.org/RePEc:aib:ibtjbs:v:1:y:2005:i:2:p:99-126

DOI: 10.46745/ilma.ibtjbs.2005.12.1

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