Trading activity and liquidity supply in a pure limit order book market
In this paper we perform an empirical analysis of the trading process in a pure limit order book market, the Xetra system which operates at various European exchanges. We study how present and past liquidity supply and demand as well as price volatility affect future trading activity and market resiliency, and discuss the results in the light of predictions implied by theoretical models of financial market microstructure. Using time series of reconstructed limit order books we identify latent factors which explain future order submission and cancelation decisions, according to hypotheses put forth by microstructure theory. We test these hypotheses with a new econometric methodology for the analysis of multivariate count processes.
|Date of creation:||00 Sep 2004|
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- PASCUAL, Roberto & VEREDAS, David, 2004. "What pieces of limit order book information are informative ?," CORE Discussion Papers 2004033, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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"Quantiles for counts,"
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CWP22/02, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
- BAUWENS, Luc & HAUTSCH, Nikolaus, 2003. "Dynamic latent factor models for intensity processes," CORE Discussion Papers 2003103, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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