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on Market Microstructure |
| By: | E. Bacry; J. F Muzy |
| Abstract: | We introduce a multivariate Hawkes process that accounts for the dynamics of market prices through the impact of market order arrivals at microstructural level. Our model is a point process mainly characterized by 4 kernels associated with respectively the trade arrival self-excitation, the price changes mean reversion the impact of trade arrivals on price variations and the feedback of price changes on trading activity. It allows one to account for both stylized facts of market prices microstructure (including random time arrival of price moves, discrete price grid, high frequency mean reversion, correlation functions behavior at various time scales) and the stylized facts of market impact (mainly the concave-square-root-like/relaxation characteristic shape of the market impact of a meta-order). Moreover, it allows one to estimate the entire market impact profile from anonymous market data. We show that these kernels can be estimated from the empirical conditional mean intensities. We provide numerical examples, application to real data and comparisons to former approaches. |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1301.1135&r=mst |
| By: | Laurence Lescourret (Finance. Essec - ESSEC Business School) |
| Abstract: | This paper examines whether NASDAQ dealers' preopening quotes might be related to non-fundamental information, that is, information about transient trading pressure unrelated to fundamentals. Preopening quotes posted by wholesalers (dealers specialized in market-making and thus presumably more exposed to inventory risks) are strongly related to opening price reversals, a measure of transitory price pressure. Wholesalers are more likely to post preopening quotes on days characterized by large liquidity shocks or days following larger order imbalances, but not on days of strong informational asymmetry about fundamentals (days of analyst recommendation releases, earnings announcements or merger announcements). These patterns do not hold for other intermediaries, namely institutional brokers providing sell-side coverage. I also nd that daily order imbalances (another trading pressure measure) are strongly related to the preopening activity of wholesalers but not to any other groups of market-makers with more diversi ed banking activities. Overall, I interpret this as evidence that non-fundamental information matters during the preopening session and impacts intermediaries' preopening behavior. |
| Keywords: | Market Microstructure ; Preopen ; NASDAQ ; Non-fundamental Information ; Price Reversals ; Order Imbalances |
| Date: | 2012–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-00772798&r=mst |