Investigation of the Trade Durations with Autoregressive Conditional Duration Model: Evidence from Borsa İstanbul

Abstract

This research paper explores duration dynamics within the Borsa İstanbul (BIST) stock exchange by utilizing the Autoregressive Conditional Duration (ACD) model applied to the time between consecutive trades. The investigation of an appropriate error term specification demonstrates that the Weibull ACD (WACD) model is the most suitable choice of distribution. The application of the WACD model on the ten most actively traded stocks in the market reveals cross-sectional variations in the trade duration dynamics, where the degree of duration clustering varies even among the most liquid stocks in the market. The study indicates that the duration dynamics within the Borsa İstanbul are closer to those observed in developing markets, in terms of market microstructure and intraday liquidity, rather than those in developed markets. These findings provide insights for market participants and academics to better understand the trade duration dynamics within the BIST market.

Keywords

• Autoregressive Conditional Duration model
• Market microstructure
• Intraday liquidity
• Duration clustering
• High frequency data

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