Trading and Market Microstructure
We study the dynamics of order flows around large intraday price changes using ultra-high-frequency data from the Shenzhen Stock Exchange. We find a significant reversal of price for both intraday price decreases and increases with a…
Evolutions of the trading landscape lead to the capability to exchange the same financial instrument on different venues. Because of liquidity issues, the trading firms split large orders across several trading destinations to optimize…
Traditional market makers are losing their importance as automated systems have largely assumed the role of liquidity provision in markets. We update the model of Glosten and Milgrom (1985) to analyze this new world: we add multiple…
The use of kinetic modelling based on partial differential equations for the dynamics of stock price formation in financial markets is briefly reviewed. The importance of behavioral aspects in market booms and crashes and the role of…
The possibility that the collective dynamics of a set of stocks could lead to a specific basket violating the efficient market hypothesis is investigated. Precisely, we show that it is systematically possible to form a basket with a…
Kinetic exchange models have been successful in explaining the shape of the income/wealth distribution in the economies. However, such models usually make some ad-hoc assumptions when it comes to determining the savings factor. Here, we…
This paper proposes a parametric approach for stochastic modeling of limit order markets. The models are obtained by augmenting classical perfectly liquid market models by few additional risk factors that describe liquidity properties of…
Motivated by the literature on investment flows and optimal trading, we examine intraday predictability in the cross-section of stock returns. We find a striking pattern of return continuation at half-hour intervals that are exact multiples…
We study a simple model of an asset market with informed and non-informed agents. In the absence of non-informed agents, the market becomes information efficient when the number of traders with different private information is large enough.…
Representative investors whose behaviour is modelled by a deterministic finite automaton generate complexity both in the time series of each asset and in the cross-sectional correlation when the rule governing their behaviour is…
The order submission and cancelation processes are two crucial aspects in the price formation of stocks traded in order-driven markets. We investigate the dynamics of order cancelation by studying the statistical properties of…
We seek to utilize the nonextensive statistics to the microscopic modeling of the interacting many-investor dynamics that drive the price changes in a market. The statistics of price changes are known to be fit well by the Students-T and…
We use techniques from network science to study correlations in the foreign exchange (FX) market over the period 1991--2008. We consider an FX market network in which each node represents an exchange rate and each weighted edge represents a…
The goal of this article is to understand some interesting features of sequences of arbitrage operations, which look relevant to various processes in Economics and Finances. In the second part of the paper, analysis of sequences of…
In this paper we examine inefficiencies and information disparity in the Japanese stock market. By carefully analysing information publicly available on the internet, an `outsider' to conventional statistical arbitrage strategies--which are…
We study a simple exchange model in which price is fixed and the amount of a good transferred between actors depends only on the actors' respective budgets and the existence of a link between transacting actors. The model induces a…
Using virtual stock markets with artificial interacting software investors, aka agent-based models (ABMs), we present a method to reverse engineer real-world financial time series. We model financial markets as made of a large number of…
We develop a theoretical trading conditioning model subject to price volatility and return information in terms of market psychological behavior, based on analytical transaction volume-price probability wave distributions in which we use…
Real world markets display power-law features in variables such as price fluctuations in stocks. To further understand market behavior, we have conducted a series of market experiments on our web-based prediction market platform which…
We consider optimal execution strategies for block market orders placed in a limit order book (LOB). We build on the resilience model proposed by Obizhaeva and Wang (2005) but allow for a general shape of the LOB defined via a given density…