Mean-Variance Optimization for Simulation of Order Flow

In this article, the authors propose an order flow simulator for meta orders such as those originating from the trading activity of buy-side firms. The simulator is designed with three key goals in mind. First, it should be simple to use and integrate into different applications. Second, it must be computationally efficient to handle a large number of securities. Third, the simulated order flow should possess statistical properties similar to those of observed order flow in the market. The authors provide two empirical examples. In addition to illustrating statistical properties of the order flow simulator, they use the simulator to estimate the number of trades needed to determine whether order flow from a buy-side firm has alpha