Intra-day market activity

Gaelle Le Fol and Christian Gourieroux
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Christian Gourieroux: CREST - Centre de Recherche en Économie et Statistique - ENSAI - Ecole Nationale de la Statistique et de l'Analyse de l'Information [Bruz] - X - École polytechnique - IP Paris - Institut Polytechnique de Paris - ENSAE Paris - École Nationale de la Statistique et de l'Administration Économique - IP Paris - Institut Polytechnique de Paris - CNRS - Centre National de la Recherche Scientifique, Department of Economics - University of Toronto

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Abstract: This paper presents a study of intra-day patterns of stock market activity and introduces duration based activity measures for single stocks and multiple assets. The proposed measures involve weighted durations, i.e. times necessary to sell (buy) a predetermined volume or value of stocks. As such, they capture dependencies between intra-trade durations, transaction volumes and prices, and can be interpreted as liquidity measures. This approach allows us to highlight the intra-day variations of liquidity, its costs and volatility, and to develop a liquidity based asset ordering. The extension to a multivariate analysis yields new insights into the dynamics of portfolio liquidity by revealing various aspects of asset substitution, including the e!ects of correlated trade intensities of portfolio components. Several examples are used to show that in practice, the proposed liquidity measures become e$cient instruments for strategic block trading and optimal portfolio adjustments. The paper also contains an empirical study of asset activity on the Paris Bourse. We examine the liquidity dynamics throughout the day and reveal the existence of periodic patterns resulting from world-wide interactions of major stock markets. In the multivariate setup, we report evidence on common patterns and correlations of trade intensities of selected stocks.

Keywords: Liquidity; High frequency data; Duration models; Activity and co-activity measures (search for similar items in EconPapers)
Date: 1999
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Citations: View citations in EconPapers (31)

Published in Journal of Financial Markets, 1999, 2, pp.193-226

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:halshs-00536268

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