Exercise 4 (High-frequency data) 6 points) Consider the transaction data for the Alcoa stock on June 7. 2010. Use the ta

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Exercise 4 High Frequency Data 6 Points Consider The Transaction Data For The Alcoa Stock On June 7 2010 Use The Ta 1 (42.75 KiB) Viewed 22 times

Exercise 4 (High-frequency data) 6 points) Consider the transaction data for the Alcoa stock on June 7. 2010. Use the taq-aa-t-june 72010.txt file available on Ruey Tsay's website which you can download by - licking here. (a) Load the data and construct a time variable for the time in seconds from midnight of each transaction. Remove transactions made outside of regular hours. (b) Use the price series to confirm the presence of the bid-ask bounce in intraday trading of Alcoa stock. (c) Calculate the trade durations and remove the zero durations. Give the mean, the variance and the dispersion index (the mean/variance ratio) as well as the autocorrelation at lag-10 and lag-50. (d) Compute the adjusted durations by removing the diurnal pattern o(t.) according to the following specification: In olt.) = Be + Bufilt:) + B2f2(t) +B3/3(ti) where 23,400 12(0) = ((1)). fa(t) = Int. Give the mean, the variance and the dispersion index of the adjusted durations as well as the autocorre lation at lag-10 and lag-50. Compare with the values obtained in (e) for the raw durations. (e) Estimate the diurnal pattern according to the flexible Fourier approximation for Q = 2,3,4: fi(t) = -43,200 In olt.) = 49+0171+ 4,1 cos(T. - 291) + B4:2 sin(T. • 29x), t-34. 200 TE 23.400 (f) Represent on the same graph the functions (t) estimated in (c) and (d) for the diurnal pattern and add a legend to identify the different specifications. Briefly comment.