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Rational Heuristics? Expectations and Behaviors in Evolving Economies with Heterogeneous Interacting Agents
Dosi, Giovanni - 2020
expectations with less naïve learning rules. Our results suggest that fast and frugal robust heuristics may not be a second …
Persistent link: https://www.econbiz.de/10012481880
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How Often to Sample a Continuous-Time Process in the Presence of Market Microstructure Noise
Ait-Sahalia, Yacine - 2003
Classical statistics suggest that for inference purposes one should always use as much data as is available. We study how the presence of market microstructure noise in high-frequency financial data can change that result. We show that the optimal sampling frequency at which to estimate the...
Persistent link: https://www.econbiz.de/10012469087
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Modeling the Impacts of Market Activity on Bid-Ask Spreads in the Option Market
Cho, Young-Hye - 1999
using transactions data. We propose a new market microstructure theory which we call derivative hedge theory, in which … volume as a measure of liquidity and supports the derivative hedge theory. Option market spreads are positively related to … spreads in the underlying market, again supporting our theory. However, option market duration does affect option market …
Persistent link: https://www.econbiz.de/10012471453
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Order Flow and Exchange Rate Dynamics
Evans, Martin D.D. - 1999
Macroeconomic models of nominal exchange rates perform poorly. In sample, R2 statistics as high as 10 percent are rare. Out of sample, these models are typically out-forecast by a na‹ve random walk. This paper presents a model of a new kind. Instead of relying exclusively on macroeconomic...
Persistent link: https://www.econbiz.de/10012471467
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On the Correlation Structure of Microstructure Noise : A Financial Economic Approach
Diebold, Francis X. - 2010
volatility estimation. In particular, we use market microstructure theory to derive the cross-correlation function between latent …
Persistent link: https://www.econbiz.de/10012462188
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Ultra High Frequency Volatility Estimation with Dependent Microstructure Noise
Ait-Sahalia, Yacine - 2005
We analyze the impact of time series dependence in market microstructure noise on the properties of estimators of the integrated volatility of an asset price based on data sampled at frequencies high enough for that noise to be a dominant consideration. We show that combining two time scales for...
Persistent link: https://www.econbiz.de/10012467303
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A Tale of Two Time Scales : Determining Integrated Volatility with Noisy High Frequency Data
Zhang, Lan - 2003
It is a common practice in finance to estimate volatility from the sum of frequently-sampled squared returns. However market microstructure poses challenges to this estimation approach, as evidenced by recent empirical studies in finance. This work attempts to lay out theoretical grounds that...
Persistent link: https://www.econbiz.de/10012468583
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Inventory Information
Cao, H. Henry - 2003
In a market with symmetric information about fundamentals, can information-based trade still arise? Consider bond and FX markets, where private information about nominal cash flows is generally absent, but participants are convinced that superior information exists. We analyze a class of...
Persistent link: https://www.econbiz.de/10012468804
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Econometric Models of Limit-Order Executions
Lo, Andrew W. - 1997
This paper attempts to assess whether money can generate persistent economic" fluctuations in dynamic general equilibrium models of the business cycle. We show that a small" nominal friction in the goods market can make the response of output to monetary shocks large" and persistent if it is...
Persistent link: https://www.econbiz.de/10012472554
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Stock Price Manipulation, Market Microstructure and Asymmetric Information
Allen, Franklin - 1991
In recent years, there has been a large literature on how stock exchange specialists set prices when there are investors who know more about the stock than they do. An important assumption in this literature is that there are *liquidity traders* who are equally likely to buy or sell for...
Persistent link: https://www.econbiz.de/10012475127