The Econometrics of Sequential Trade Models

1 Introduction.- 2 Trading Mechanisms on Financial Markets.- 2.1 Typology of Security Markets.- 2.2 Market Participants and Institutional Setup on the NYSE.- 3 Sequential Trade Models.- 3.1 Market Microstructure Theory.- 3.2 Microstructure Models of the Black Box under Asymmetric Information.- 3.3 The Basic Sequential Trade Model.- 3.4 Extensions.- 3.5 Estimation of Structural Models.- 3.6 Results of Previous Studies.- 4 Econometric Analysis of Sequential Trade Models.- 4.1 The EKOP Model and Finite Mixture Models.- 4.2 Model Evaluation and Specification Testing.- 4.3 Mixture and Regime Switching Models in Econometrics.- 5 Empirical Results.- 5.1 The TAQ Database.- 5.2 The Trade Direction.- 5.3 Descriptive Statistics.- 5.4 Estimation Results.- 6 Conclusions.- A.l The Poisson Process.- A.2 Maximum Likelihood Estimation of a Multivariate Poisson Mixture Model.- A.3 The EM-Algorithm.- A.4 The Poisson Regression Model.- A.5 The Negative Binomial Regression Model.- A.6 Moments of Mixture Distributions.- A.7 Unobserved Individual Variation of Trade Arrival Rates.- A.8 Markov Chains.- A.9 The Smoothing Algorithm.- A.1O Estimation of Transition Probabilities in the Markov Switching Model.- A.11 Moments of the Dependent Variable in a Markov Switching Model.- References.- List of Figures.- List of Tables.