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Go with the Flow: A GAS model for Predicting Intra-daily Volume Shares

Francesco Calvori, Fabrizio Cipollini () and Giampiero Gallo ()
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Francesco Calvori: Dipartimento di Statistica, Informatica, Applicazioni "G. Parenti", Università di Firenze

No 2014_01, Econometrics Working Papers Archive from Universita' degli Studi di Firenze, Dipartimento di Statistica, Informatica, Applicazioni "G. Parenti"

Abstract: The Volume Weighted Average Price (VWAP) mixes volumes and prices at intra-daily intervals and is a benchmark measure frequently used to evaluate a trader's performance. Under suitable assumptions, splitting a daily order according to ex-ante volume predictions is a good strategy to replicate the VWAP. To bypass possible problems generated by local trends in volumes, we propose a novel Generalized Autoregressive Score (GAS) model for predicting volume shares (relative to the daily total), inspired by the empirical regularities of the observed series (intra-daily periodicity pattern, residual serial dependence). An application to six NYSE tickers confirms the suitability of the model proposed in capturing the features of intra-daily dynamics of volume shares.

Keywords: High Frequency Financial Data; Prediction; Trading Volumes; Volume Shares; VWAP; GAS; Dirichlet Distribution (search for similar items in EconPapers)
JEL-codes: C22 C53 C58 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2014-02, Revised 2014-02
New Economics Papers: this item is included in nep-ecm, nep-for and nep-mst
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Persistent link: https://EconPapers.repec.org/RePEc:fir:econom:wp2014_01

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