On the quadratic variation in limit order markets

IF 6.3 2区 经济学 Q1 BUSINESS, FINANCE Borsa Istanbul Review Pub Date : 2024-07-01 DOI:10.1016/j.bir.2024.04.004
Sudhanshu Pani PhD
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Abstract

This paper explores the quadratic variation (QV) as an alternative measure to the bid-ask spread in limit order markets when observed at high resolution. Although the spread cannot be precisely estimated because of microstructure noise, the QV of the price series, consisting of the transaction prices and midquotes (an expanded filtration of transaction prices), in limit order markets is an important property of high-frequency datasets. An empirical examination of a sample of stocks from the NASDAQ 100 is used to estimate and examine the QV. The examination is done at high resolution (subsecond timescale). The QV of our sample best fits a log-normal distribution with higher skewness. The QV of trades (29.73E–05) is distant from the QV measured with pretrade and posttrade price series, as they are characterized by a high range in QV. Similarly, the QV is generally lower with pretrades than posttrades. Using a high resolution, the revealed state of the limit order book presents a solution that reduced the impact cost of trading. The QV is higher with the limit order book (68.5E–05) than with trades. A measure called the limit-to-market order signal shows a consistent pattern of decline in stocks with increasing activity. The limit-to-market signal ranged from an average of 3.55 in the first quartile of stocks based on messages to 1.84 in the third quartile. This signal decreases because of a relatively larger decline in uncertainty in QV using the limit order book.

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关于限价订单市场的二次变化
本文探讨了在高分辨率下观察限价订单市场时,将二次变差(QV)作为买卖价差的替代衡量指标。虽然由于微观结构噪声的影响,价差无法精确估算,但限价订单市场中由交易价格和中间报价(交易价格的扩展过滤)组成的价格序列的 QV 是高频数据集的一个重要属性。对纳斯达克 100 指数样本股的实证检验用于估计和检验 QV。检验以高分辨率(亚秒级)进行。我们样本的 QV 最符合偏度较高的对数正态分布。交易的 QV 值(29.73E-05)与交易前和交易后价格序列测得的 QV 值相差甚远,因为它们的特点是 QV 值范围较大。同样,交易前的 QV 值一般低于交易后的 QV 值。使用高分辨率,限价订单簿的揭示状态提供了一种降低交易影响成本的解决方案。限价订单簿的 QV(68.5E-05)高于交易。一种名为 "限价盘到市场订单信号 "的测量方法显示,随着交易活动的增加,股票的跌幅也在不断扩大。限价盘到市场信号从第一四分位数股票的平均 3.55 到第三四分位数的 1.84 不等。这一信号的下降是由于使用限价盘的 QV 不确定性下降幅度相对较大。
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来源期刊
CiteScore
7.60
自引率
3.80%
发文量
130
审稿时长
26 days
期刊介绍: Peer Review under the responsibility of Borsa İstanbul Anonim Sirketi. Borsa İstanbul Review provides a scholarly platform for empirical financial studies including but not limited to financial markets and institutions, financial economics, investor behavior, financial centers and market structures, corporate finance, recent economic and financial trends. Micro and macro data applications and comparative studies are welcome. Country coverage includes advanced, emerging and developing economies. In particular, we would like to publish empirical papers with significant policy implications and encourage submissions in the following areas: Research Topics: • Investments and Portfolio Management • Behavioral Finance • Financial Markets and Institutions • Market Microstructure • Islamic Finance • Financial Risk Management • Valuation • Capital Markets Governance • Financial Regulations
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