Abstract
In this Chapter we will motivate the derivation of the sample log likelihood for several generalizations of the model developed by Easley, Kiefer, O'Hara, and Paperman (1996). These models will also prove useful, when it comes to testing some of the restrictions of the EKOP model, that are likely to be violated in many samples, while the basic structure of the approach still holds. As an illustration, consider the case, in which the arrival rate of informed sellers on bad news days differs systematically from the arrival rate of informed buyers on good news days, which in the EKOP framework is restricted to be the same. This might be due to short selling restrictions or stem from credit market imperfections that lead to an inability of the informed traders to capitalize their superior information completely.1
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© 2004 Springer-Verlag Berlin Heidelberg
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Kokot, S. (2004). Econometric Analysis of Sequential Trade Models. In: The Econometrics of Sequential Trade Models. Lecture Notes in Economics and Mathematical Systems, vol 538. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-17115-4_4
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DOI: https://doi.org/10.1007/978-3-642-17115-4_4
Publisher Name: Springer, Berlin, Heidelberg
Print ISBN: 978-3-540-20814-3
Online ISBN: 978-3-642-17115-4
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