nep-mst New Economics Papers
on Market Microstructure
Issue of 2018‒04‒23
two papers chosen by
Thanos Verousis

  1. Modelling intensities of order flows in a limit order book By Ioane Muni Toke; Nakahiro Yoshida
  2. The effect of geographical distance on online transactions: Evidence from the Netherlands By Ali Palali; Bas Straathof; Rinske Windig

  1. By: Ioane Muni Toke (MICS - Mathématiques et Informatique pour la Complexité et les Systèmes - CentraleSupélec, ERIM - Equipe de Recherche en Informatique et Mathématiques - Université de la Nouvelle-Calédonie, CREST - Core Research for Evolutional Science and Technology - JST - Japan Science and Technology Agency); Nakahiro Yoshida (CREST - Core Research for Evolutional Science and Technology - JST - Japan Science and Technology Agency, Graduate School of Mathematical Sciences[Tokyo] - The University of Tokyo)
    Abstract: We propose a parametric model for the simulation of limit order books. We assume that limit orders, market orders and cancellations are submitted according to point processes with state-dependent intensities. We propose new functional forms for these intensities, as well as new models for the placement of limit orders and cancellations. For cancellations, we introduce the concept of " priority index " to describe the selection of orders to be cancelled in the order book. Parameters of the model are estimated using likelihood maximization. We illustrate the performance of the model by providing extensive simulation results, with a comparison to empirical data and a standard Poisson reference.
    Keywords: order book,limit orders,market orders,cancellations,state-dependent point processes,intensity-based models
    Date: 2017–03–06
  2. By: Ali Palali (CPB Netherlands Bureau for Economic Policy Analysis); Bas Straathof (CPB Netherlands Bureau for Economic Policy Analysis); Rinske Windig (CPB Netherlands Bureau for Economic Policy Analysis)
    Abstract: The rise of online trade alters the role of distance between (potential) buyers and sellers. We use data from eBay subsidiary, one of the largest online trading platforms in the Netherlands, to estimate how distance affects the probability of a transaction between small geographical regions. We find that distance negatively and modestly affects the probability of having a transaction between two regions, and that the distribution of this probability is highly skewed: ranging from a change of 0.000 to -0.008 percentage points per marginal kilometer. The unconditional probability of a transaction is 27 percent. Distance is less influential for: advertisements with more photos advertisements placed by high-frequency advertisers for new goods in comparison to second hand goods. This suggests that information frictions might be the driving force behind the distance effect on online trade in the Netherlands.
    JEL: D44 R12
    Date: 2017–10

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