Modelling and forecasting liquidity supply using semiparametric factor dynamics
- We model the dynamics of ask and bid curves in a limit order book market using a dynamic semiparametric factor model. The shape of the curves is captured by a factor structure which is estimated nonparametrically. Corresponding factor loadings are assumed to follow multivariate dynamics and are modelled using a vector autoregressive model. Applying the framework to four stocks traded at the Australian Stock Exchange (ASX) in 2002, we show that the suggested model captures the spatial and temporal dependencies of the limit order book. Relating the shape of the curves to variables reflecting the current state of the market, we show that the recent liquidity demand has the strongest impact. In an extensive forecasting analysis we show that the model is successful in forecasting the liquidity supply over various time horizons during a trading day. Moreover, it is shown that the model’s forecasting power can be used to improve optimal order execution strategies.
Verfasserangaben: | Wolfgang HärdleORCiDGND, Nikolaus HautschORCiDGND, Andrija MihociGND |
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URN: | urn:nbn:de:hebis:30-70742 |
Titel des übergeordneten Werkes (Deutsch): | Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 2009,18 |
Schriftenreihe (Bandnummer): | CFS working paper series (2009, 18) |
Dokumentart: | Arbeitspapier |
Sprache: | Englisch |
Jahr der Fertigstellung: | 2009 |
Jahr der Erstveröffentlichung: | 2009 |
Veröffentlichende Institution: | Universitätsbibliothek Johann Christian Senckenberg |
Datum der Freischaltung: | 20.09.2009 |
Freies Schlagwort / Tag: | Factor Structure; Limit Order Book; Liquidity Risk; Prediction; Semiparametric Model |
GND-Schlagwort: | Sydney Stock Exchange; Liquidität; Angebot; Nachfrage; Geschichte 2002 |
HeBIS-PPN: | 218888732 |
Institute: | Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS) |
DDC-Klassifikation: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
JEL-Klassifikation: | C Mathematical and Quantitative Methods / C1 Econometric and Statistical Methods: General / C14 Semiparametric and Nonparametric Methods |
C Mathematical and Quantitative Methods / C3 Multiple or Simultaneous Equation Models / C32 Time-Series Models; Dynamic Quantile Regressions (Updated!) | |
C Mathematical and Quantitative Methods / C5 Econometric Modeling / C53 Forecasting and Other Model Applications | |
Lizenz (Deutsch): | Deutsches Urheberrecht |