Title: Heterogeneous component MEM models for forecasting trading volumes
Authors: Giuseppe Storti - University of Salerno (Italy) [presenting]
Antonio Naimoli - University of Salerno (Italy)
Abstract: A novel approach is proposed for modelling and forecasting high-frequency trading volumes, revisiting the Component Multiplicative Error Model by a more flexible specification of the long-run component which is based on a Heterogeneous MIDAS polynomial structure. This uses an additive cascade of MIDAS polynomial filters moving at different frequencies in order to reproduce the changing long-run level and the persistent autocorrelation structure of high frequency trading volumes. The merits of the proposed approach are illustrated by means of an application to three stocks traded on the XETRA market characterised by different degrees of liquidity.