NYSE trading is a continuous auction process distinguished by order flow imbalances and non-coincident revision of the bid and the ask. To deal with the aggregation problem presented by non-coincident revision of the quotes, we propose a regime-level empirical model and use it to test the Brock and Kleidon queuing theory of a continuous auction. Using transactions data for IBM for calendar year 1988, Harris, McInish, and Chakravarity (1995) performed a Hausman-type specification test that confirmed the exogeneity of order flow volumes at the bid and the ask. Extending their work, this paper estimates two simultaneous autoregressive ask and bid equations for 50 randomly selected stocks and contrasts thinly traded and volatile stocks. The results support Brock and Kleidon's distinguishing implication—namely, exogenous increases in trading volume raise the ask and lower the bid. Although some queuing system characteristics prove endogenous in thinly traded stocks and in especially volatile stocks, exogenous order flow volume continues to increase spreads across the 50 stock sample. The paper draws conclusions about the appropriate specification of endogeneity, cross-equation disturbances from the bid to the ask, and cross-equation queuing information flows.
Review of Quantitative Finance and Accounting – Springer Journals
Published: Oct 8, 2004
It’s your single place to instantly
discover and read the research
that matters to you.
Enjoy affordable access to
over 18 million articles from more than
15,000 peer-reviewed journals.
All for just $49/month
Query the DeepDyve database, plus search all of PubMed and Google Scholar seamlessly
Save any article or search result from DeepDyve, PubMed, and Google Scholar... all in one place.
Get unlimited, online access to over 18 million full-text articles from more than 15,000 scientific journals.
Read from thousands of the leading scholarly journals from SpringerNature, Elsevier, Wiley-Blackwell, Oxford University Press and more.
All the latest content is available, no embargo periods.
“Hi guys, I cannot tell you how much I love this resource. Incredible. I really believe you've hit the nail on the head with this site in regards to solving the research-purchase issue.”Daniel C.
“Whoa! It’s like Spotify but for academic articles.”@Phil_Robichaud
“I must say, @deepdyve is a fabulous solution to the independent researcher's problem of #access to #information.”@deepthiw
“My last article couldn't be possible without the platform @deepdyve that makes journal papers cheaper.”@JoseServera