recent developments in high frequency financial ... - Index of

Table 5 (continued)
Variable Ask Bid
Buy shock Sell shock Buy shock Sell shock
Δabs(IRF) (%) Signif. (1%) Δabs(IRF) (%) Signif. (1%) Δabs(IRF) (%) Signif. (1%) Δabs(IRF) (%) Signif. (1%)
NYSE 1996 S M L I D S M L I D S M L I D S M L I D
All stocks
Tt −0.44 −1.66 −4.00 7 24 −1.15 −4.76 −0.90 11 19 −0.03 0.89 3.05 16 14 −0.04 0.15 3.37 13 18
Rt 0.46 2.56 7.53 31 1 1.65 9.31 26.21 22 9 1.84 11.74 33.64 25 5 0.46 2.51 7.69 29 4
OIt 0.84 −1.51 −6.20 1 32 0.12 1.29 6.75 26 5 3.80 −1.04 −4.68 3 28 −0.65 1.19 5.10 29 4
Mt −49.80 0 22 −92.80 0 5 −96.64
0
0 3
10
1
−54.12
0 1
0 22
1 0 AaB;t AaB;t at
B 0 1 AbB;t AbS;t C bt
This table reports the result of simulating a unitary trade−related shock using the VEC model, B
C
@ 0 0 1 0 A x
0 0 0 1
B t
xS B C
B C
@ A
t
¼
EC
a L ð Þ
EC
b L B ð ÞC
B C
@
BðLÞ A
SðLÞ st 1 þ AtðLÞ at 1
bt 1
ex B 0 1
B C
B C
@ A
t 1
þ
ua t
ub t
uB 0 1
B C
B C
@ A
t
with the restrictions,At
0
1
AaaðLÞ 0 AaB;tðLÞ AaS;tðLÞ B 0 AbbðLÞ AbB;tðLÞ AbS;tðLÞ C
ðLÞ ¼ B
C
@ ABaðLÞ 0 ABB;tðLÞ ABS;tðLÞAwhen we alter the level of the exogenous variables in the
0 ASbðLÞ ASB;tðLÞ ASS;tðLÞ ex S t 1 uS t
autoregressive matrix. The exogenous variables are: trade durations (Tt), short-term volatility (Rt), order imbalance (OIt), and a dummy variable that identifies
regional market trades (Mt). The error-correction term is the bid-ask spread. The endogenous variables are the change in the ask quote (Δat) and the bid quote (Δbt),
and trade-size indicators for buys ex B t and for sells ex S t
We use data on 11 NYSE-listed stocks from January to March 1996, 11 NYSE-listed stocks from January to March 2000, and 11 SSE stocks from July to September
2000. For each stock, we compute the response of ask and bid prices to both a buyer-initiated shock and a seller-initiated shock, 500 periods ahead. The impact
depends on the level of several exogenous variables that feature the trade and the market conditions. Three levels of each variable are considered: “small” (S),
“medium” (M), and “large” (L), obtained from the 25%, 75%, and 95% percentiles of the empirical distribution. For the Mt dummy, we compare the impact of a
NYSE trade with the impact of a regional trade. This table reports the average relative change (in %) across stocks in the total impact of a unitary trade-related shock
when the exogenous variable increases from zero to S, from zero to M, and from zero to L. We also provide the number of stocks in each subsample for which the
absolute IRF significantly increases/decreases as we increase the level of the corresponding exogenous variable
Asymmetries in bid and ask responses to innovations in the trading process 75