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on Market Microstructure |
| By: | Høg, Esben (Department of Business Studies, Aarhus School of Business) |
| Abstract: | This paper analyzes some asymptotic results for an alternative estimator of integrated volatility in a continuous-time diffusion process of high frequency data (used in asset pricing finance). <p> The estimator, which is computationally efficient, is based on the quadratic variation of the second order log-price differences. This is contrary to the well known realized quadratic variation of intra daily returns (which is based on first order log-price differences). This latter is known as realized volatility. <p> Analytically, the asymptotics of the proposed estimator is compared to the usual realized volatility estimators. Lastly, we provide some simulation experiments to illustrate the results. |
| Keywords: | continuous-time methods; quadratic variation; realized volatility; second order quadratic variation |
| Date: | 2008–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:hhb:aarbfi:2008-06&r=mst |
| By: | Daisuke Nagakura; Toshiaki Watanabe |
| Abstract: | We call the realized variance (RV) calculated with observed prices contaminated by microstructure noises (MNs) the noise-contaminated RV (NCRV) and refer to the component in the NCRV associated with the MNs as the MN component. This paper develops a state space method for estimating the integrated variance (IV) and MN component simultaneously. We represent the NCRV by a state space form and show that the state space form parameters are not identifiable; however, they can be expressed as functions of fewer identifiable parameters. We illustrate how to estimate these parameters. The proposed method is applied to yen/dollar exchange rate data. |
| Keywords: | Realized Variance, Integrated Variance, Microstructure Noise, State Space, Identification, Exchange Rate |
| Date: | 2009–03 |
| URL: | http://d.repec.org/n?u=RePEc:hst:ghsdps:gd09-055&r=mst |
| By: | Michael Firth (Lingnan University of Hong Kong); T. Y. Leung (City University of Hong Kong); Oliver M. Rui (The Chinese University of Hong Kong) |
| Abstract: | We examine legal insider trading activities by directors of companies listed on the Hong Kong Exchange over the period 1993 to 1999. One characteristic of insider trading in Hong Kong is the high frequency of transactions and the large dollar amounts involved. Inside purchases appear to signal and correct undervaluation and inside sales appear to signal and correct overvaluation. In contrast to research from Britain and the United States, insider sales are more informative than purchases. On average, insiders earn HK$91,297 per trade although outsiders who mimic insiders' transactions earn minimal returns. Many firms suffer from infrequent trading and our results are consistent with directors engaging in inside transactions so as to help create a market for the shares. In additional tests, we find that the frequency of insider trading is a function of information asymmetry. |
| Date: | 2009–01 |
| URL: | http://d.repec.org/n?u=RePEc:hkm:wpaper:042009&r=mst |
| By: | Naes, Randi (Ministry of Industry); Ødegaard, Bernt Arne (University of Stavanger) |
| Abstract: | We use data on actual holding periods for all investors in a stock market over a 10-year period to investigate the links between holding periods, liquidity, and asset returns. Microstructure measures of liquidity are shown to be important determinants of the holding period decision of individual investors. Average holding periods differ across different investor types. Turnover is an imperfect proxy for holding period. While both turnover and spread are related to stock returns, holding period is not. |
| Keywords: | Market microstructure; Holding period; duration |
| JEL: | G10 G11 G12 |
| Date: | 2009–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:stavef:2009_019&r=mst |
| By: | Ranaldo, Angelo; Söderlind, Paul |
| Abstract: | We study high-frequency exchange rate movements over the sample 1993-2007. We document that the (Swiss) franc, euro, Japanese yen and the pound tend to appreciate against the U.S. dollar when (a) S&P has negative returns; (b) U.S. bond prices increase; and (c) when currency markets become more volatile. In these situations, the franc appreciates also against the other currencies, while the pound depreciates. The safe haven properties correspond to the carry trader's losses. They materialize over different time granularities (from a few hours to several days), during both "ordinary days" and crisis episodes and show some non-linear features. |
| Keywords: | crisis episodes; high-frequency data; non-linear effects |
| JEL: | F31 G15 |
| Date: | 2009–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:7249&r=mst |