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Duration modelling of the after-hours electronic futures market

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Li, T (2012) Duration modelling of the after-hours electronic futures market. PhD thesis, University of Tasmania.

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Abstract

This thesis explores a class of models for modelling the time between trades,
known as trade duration, in the after-hours electronic market for U.S. equity
futures. These electronic markets have grown signi�cantly over the last 10 years
but little empirical work has been done to describe them. This is particularly
so with duration modelling. High frequency trade duration data for the S&P
500 and NASDAQ-100 modelled in this thesis are collected from the GLOBEX
electronic trading platform from the Chicago Mercantile Exchange for the period
of 2004 to 2008.
This thesis �rst �ts standard linear Autoregressive Conditional Duration (ACD)
models with Exponential, Weibull and Generalized Gamma error distributional
assumptions to the period 2004 to 2006. The Generalized Gamma distribution
outperforms the alternatives but still provides unsatisfactory results in the form
of serially correlated residuals (volume is used as an additional mark in the model
speci�cations). In order to improve the models, nonlinear forms of ACDmodel are
estimated. In particular, the threshold and logarithmic forms are implemented.
Although the results improve with these more �exible forms, there remains con-
tinued evidence of nonlinearity in the results.
As a consequence, and taking into consideration the fact that the sample pe-
riod of this thesis is much longer than the 3 month samples typically examined
in the existing ACD literature, the thesis then examines the S&P 500 data for
potential structural changes. Structural breaks are detected using a range of con-
ditional Lagrange Multiplier tests associated with Andrews (1993) and Andrews
and Ploberger (1994). FittingWeibull ACD models to the segmented sub-periods
identi�ed with the structural break tests signi�cantly improves the model esti-
mation results.
Finally, this thesis examines the evidence for structural breaks in ACD models
in the global �nancial crisis period using S&P 500 data from 2006 to 2008. The
most signi�cant structural change is found to occur in July, 2007, which is consis-
tent with the onset of the crisis. Many of the structural change points detected
in the data can be aligned with economic events during the crisis period, and
sub-period estimations reveal the impact of the crisis on the electronic futures
market

Item Type: Thesis (PhD)
Keywords: Duration, afterhours, high-frequency data, intraday, electronic futures
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Date Deposited: 17 Aug 2012 04:46
Last Modified: 11 Mar 2016 05:53
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