Decomposing Volume for VWAP Strategies

Jedrzej Bialkowski, Serge Darolles and Gaelle Le Fol

No 2005-16, Working Papers from Center for Research in Economics and Statistics

Abstract: In this paper, we present a new methodology for modeling intraday volume which allows fora significant reduction in the Volume Weighted Average Price (VWAP) on orders risk. Theresults are obtained for the all stocks included in the CAC40 index at the beginning ofSeptember 2004. The idea of considered models is based on the decomposition of tradedvolume into two parts: one reflects volume changes due to market evolutions, the second onedescribes the stock specific volume pattern. The dynamics of the specific part of volume isdepicted by ARMA, and SETAR models.

Pages: 49
Date: 2005
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