Testing if the market microstructure noise is fully explained by the informational content of some variables from the limit order book

DOI10.1016/J.JECONOM.2019.01.004zbMATH Open1452.62754arXiv1709.02502OpenAlexW2810031851WikidataQ128493060 ScholiaQ128493060MaRDI QIDQ1740296FDOQ1740296

Authors: Simon Clinet, Yoann Potiron 

Publication date: 30 April 2019

Published in: Journal of Econometrics (Search for Journal in Brave)

Abstract: In this paper, we build tests for the presence of residual noise in a model where the market microstructure noise is a known parametric function of some variables from the limit order book. The tests compare two distinct quasi-maximum likelihood estimators of volatility, where the related model includes a residual noise in the market microstructure noise or not. The limit theory is investigated in a general nonparametric framework. In the presence of residual noise, we examine the central limit theory of the related quasi-maximum likelihood estimation approach.

Full work available at URL: https://arxiv.org/abs/1709.02502

Recommendations

• A Hausman test for the presence of market microstructure noise in high frequency data
• On estimating market microstructure noise variance
• Estimation for high-frequency data under parametric market microstructure noise
• A Lagrangian multiplier test for market microstructure noise with applications to sampling interval determination for realized volatilities
• Model-free approaches to discern non-stationary microstructure noise and time-varying liquidity in high-frequency data

zbMATH Keywords

informationestimationtestlimit order bookquasi-maximum likelihood estimatorrealized volatilityhigh-frequency datamarket microstructure noiseintegrated volatilityefficient price

Mathematics Subject Classification ID

Asymptotic properties of parametric estimators (62F12) Applications of statistics to actuarial sciences and financial mathematics (62P05)

Cites Work

• Asymptotic Statistics
• Quasi-maximum likelihood estimation of volatility with high frequency data
• Specification Tests in Econometrics
• Title not available (Why is that?)
• The Distribution of Realized Exchange Rate Volatility
• MODEL SELECTION AND INFERENCE: FACTS AND FICTION
• Title not available (Why is that?)
• Inference for a Nonstationary Self-Exciting Point Process with an Application in Ultra-High Frequency Financial Data Modeling
• Autoregressive Conditional Duration: A New Model for Irregularly Spaced Transaction Data
• Title not available (Why is that?)
• Microstructure noise in the continuous case: the pre-averaging approach
• Efficient estimation of stochastic volatility using noisy observations: a multi-scale approach
• Designing Realized Kernels to Measure the ex post Variation of Equity Prices in the Presence of Noise
• A Tale of Two Time Scales
• Non-parametric threshold estimation for models with stochastic diffusion coefficient and jumps
• Title not available (Why is that?)
• Asymptotic equivalence for inference on the volatility from noisy observations
• Estimating quadratic variation consistently in the presence of endogenous and diurnal measurement error
• Volatility and covariation estimation when microstructure noise and trading times are endogenous
• Estimating the quadratic variation spectrum of noisy asset prices using generalized flat-top realized kernels
• Econometric Analysis of Realized Covariation: High Frequency Based Covariance, Regression, and Correlation in Financial Economics
• Ultra high frequency volatility estimation with dependent microstructure noise
• Volatility jumps
• Jump-robust volatility estimation using nearest neighbor truncation
• Efficient estimation of integrated volatility incorporating trading information
• Functional stable limit theorems for quasi-efficient spectral covolatility estimators
• On the correlation structure of microstructure noise: a financial economic approach
• Data-based ranking of realised volatility estimators
• Efficient estimation of integrated volatility and related processes
• Is the diurnal pattern sufficient to explain intraday variation in volatility? A nonparametric assessment
• Efficient asymptotic variance reduction when estimating volatility in high frequency data
• Statistical inference for the doubly stochastic self-exciting process
• On high frequency estimation of the frictionless price: the use of observed liquidity variables

Cited In (14)

• Learning multi-market microstructure from order book data
• Local Parametric Estimation in High Frequency Data
• Statistical analysis of information contents in trading volume with microstructure
• Detecting Unobserved Heterogeneity in Efficient Prices via Classifier-Lasso
• Inference on the intraday spot volatility from high-frequency order prices with irregular microstructure noise
• Disentangling Sources of High Frequency Market Microstructure Noise
• Modeling volatility for high-frequency data with rounding error: a nonparametric Bayesian approach
• Cointegration in high frequency data
• Nonparametric estimation for high-frequency data incorporating trading information
• Estimation for high-frequency data under parametric market microstructure noise
• The information content of high-frequency traders aggressive orders: recent evidence
• Market microstructure
• Dependent microstructure noise and integrated volatility estimation from high-frequency data
• Distribution-free specification test for volatility function based on high-frequency data with microstructure noise

This page was built for publication: Testing if the market microstructure noise is fully explained by the informational content of some variables from the limit order book

Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q1740296)