TY  - UNPD
A1  - Andersen, Torben G.
A1  - Cebiroglu, Gökhan
A1  - Hautsch, Nikolaus
T1  - Volatility, information feedback and market microstructure noise: a tale of two regimes
T2  - Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 569
N2  - We extend the classical ”martingale-plus-noise” model for high-frequency prices by an error correction mechanism originating from prevailing mispricing. The speed of price reversal is a natural measure for informational efficiency. The strength of the price reversal relative to the signal-to-noise ratio determines the signs of the return serial correlation and the bias in standard realized variance estimates. We derive the model’s properties and locally estimate it based on mid-quote returns of the NASDAQ 100 constituents. There is evidence of mildly persistent local regimes of positive and negative serial correlation, arising from lagged feedback effects and sluggish price adjustments. The model performance is decidedly superior to existing stylized microstructure models. Finally, we document intraday periodicities in the speed of price reversion and noise-to-signal ratios.
T3  - CFS working paper series - 569 
KW  - volatility estimation
KW  - market microstructure noise
KW  - price reversal
KW  - momentum trading
KW  - contrarian trading
Y1  - 2017
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/43007
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-430076
UR  - https://www.ifk-cfs.de/fileadmin/downloads/publications/wp/2017/CFS_WP_569.pdf
IS  - This Version: February 6, 2017
PB  - Center for Financial Studies
CY  - Frankfurt, M.
ER  -