Below is a non-exhaustive list of research articles and papers that have utilized data provided by LOBSTER or have used NASDAQ's TotalView-ITCH data. Let us know if you would like us to include one of your papers on the list.
- "IMPROVED VOLATILITY ESTIMATION BASED ON LIMIT ORDER BOOKS" - Markus Bibinger, Moritz Jirak, Markus Reiss
For a semi-martingale Xt, which forms a stochastic boundary,
a rate-optimal estimator for its quadratic variation hX, Xit is constructed
based on observations in the vicinity of Xt. The problem
is embedded in a Poisson point process framework, which reveals
an interesting connection to the theory of Brownian excursion areas.
A major application is the estimation of the integrated squared
volatility of an efficient price process Xt from intra-day order book
quotes. We derive n^-1/3 as optimal convergence rate of integrated
squared volatility estimation in a high-frequency framework with n
observations (in mean). This considerably improves upon the classical
n^-1/4 -rate obtained from transaction prices under microstructure
- "Estimating the Spot Covariation of Asset Prices - Statistical Theory and Empirical Evidence" - Bibinger, Markus and Hautsch, Nikolaus and Malec, Peter and Reiss, Markus
We propose a new estimator for the spot covariance matrix of a multi-dimensional continuous semi-martingale log asset price process which is subject to noise and non-synchronous observations. The estimator is constructed based on a local average of block-wise para- metric spectral covariance estimates. The latter originate from a local method of moments (LMM) which recently has been introduced by Bibinger et al. (2014). We prove consistency and a point-wise stable central limit theorem for the proposed spot covariance estimator in a very general setup with stochastic volatilities, leverage and for general noise distributions. Moreover, we extend the LMM estimator to be robust against autocorrelated noise and propose a method to adaptively infer the autocorrelations from the data. Based on simulations we provide empirical guidance on the optimal implementation of the estimator and apply it to high-frequency data of a cross-section of NASDAQ blue chip stocks. Employing the estimator to estimate spot covariances, correlations and volatilities in normal but also unusual periods yields novel insights into intraday covariance and correlation dynamics. We show that intraday (co-)variations (i) follow underlying periodicity patterns, (ii) reveal substantial intraday variability associated with (co-)variation risk, (iii) are strongly serially correlated, and (iv) can increase strongly and nearly instantaneously if new information arrives.[SSRN]
- "Inference for MultiDimensional High-Frequency Data: Equivalence of Methods, Central Limit Theorems, and an Application to Conditional Independence Testing" - Markus Bibinger, Per A. Mykland
We find the asymptotic distribution of the multi-dimensional multi-scale and kernel
estimators for high-frequency financial data with microstructure. Sampling times are allowed to
be asynchronous. The central limit theorem is shown to have a feasible version. In the process,
we show that the classes of multi-scale and kernel estimators for smoothing noise perturbation are
asymptotically equivalent in the sense of having the same asymptotic distribution for corresponding
kernel and weight functions. We also include the analysis for the Hayashi-Yoshida estimator in
absence of microstructure.
The theory leads to multi-dimensional stable central limit theorems for respective estimators and
hence allows to draw statistical inference for a broad class of multivariate models and linear functions
of the recorded components. This paves the way to tests and confidence intervals in risk measurement
for arbitrary portfolios composed of high-frequently observed assets. As an application, we enhance
the approach to cover more complex functions and in order to construct a test for investigating
hypotheses that correlated assets are independent conditional on a common factor. [pdf]
- "On the Dark Side of the Market: Identifying and Analyzing Hidden Order Placements" - Nikolaus Hautsch, Ruihong Huang
Trading under limited pre-trade transparency becomes increasingly popular on financial markets. We provide first evidence on traders' use of (completely) hidden orders which might be placed even inside of the (displayed) bid-ask spread.
Employing TotalView-ITCH data on order messages at NASDAQ, we propose a
simple method to conduct statistical inference on the location of hidden depth and to test economic hypotheses. Analyzing a wide cross-section of stocks, we show that market conditions reflected by the (visible) bid-ask spread, (visible) depth, recent price movements and trading signals significantly affect the aggressiveness of 'dark' liquidity supply and thus the 'hidden spread'. Our evidence suggests that traders balance hidden order placements to (i) compete for the provision of (hidden) liquidity and (ii) protect themselves against adverse selection, front-running as well as 'hidden order detection strategies' used by high-frequency traders. Accordingly, our results show that hidden liquidity locations are predictable given
the observable state of the market. [pdf]
- "Limit Order Flow, Market Impact and Optimal Order Sizes: Evidence from NASDAQ TotalView-ITCH Data" - Nikolaus Hautsch, Ruihong Huang
In this paper, we provide new empirical evidence on order submission activity and price impacts of limit orders at NASDAQ. Employing NASDAQ TotalView-ITCH data, we find that market participants dominantly submit limit orders with sizes equal to a round lot. Most limit orders are canceled almost immediately after submission if not getting executed. Moreover, only very few market orders walk through the book, i.e., directly move the best ask or bid quote. Estimates of impulse-response functions on the basis of a cointegrated VAR model for quotes and market depth allow us to quantify the market impact of incoming limit orders. We propose a method to predict the optimal size of a limit order conditional on its position in the book and a given fixed level of expected market impact. [pdf]
Let us know if you have a suggestion or update for the list.