We formulate a measure of information efficiency in a general, no-arbitrage semimartingale model of the price process. The market quality measure is applied to a high-frequency dataset from the interdealer FX market to identify changes in market efficiency after a decimalization of tick size.

High-frequency trading (HFT) has grown substantially in recent years due to fast-paced technological developments and their rapid uptake, particularly in equity markets. This review investigates how HFT could evolve and, by developing a robust understanding of its effects, identifies potential...

High frequency trading (HFT) has grown substantially in recent years, due to fast-paced technological developments and their rapid uptake, particularly in equity markets. This paper investigates how HFT could evolve and, by developing a robust understanding of its effects, to identify potential...

High frequency trading (HFT) has grown substantially in recent years, due to fast-paced technological developments and their rapid uptake, particularly in equity markets. This paper investigates how HFT could evolve and, by developing a robust understanding of its effects, to identify potential...

Futures contracts on the New York Mercantile Exchange are the most liquid instruments for trading crude oil, which is the world’s most actively traded physical commodity. Under normal market conditions, traders can easily find counterparties for their trades, resulting in an efficient market...

Do all investor types contribute equally to volatility formation? Although stock volatility should ideally originate only from fundamental innovations, it is embedded into prices through the trading process. We compare the relative contributions of trading by local institutions, local...

This paper presents an empirical investigation of scaling and multifractal properties of US Dollar–Deutschemark (USD–DEM) returns. The data set is ten years of 5-min returns. The cumulative return distributions of positive and negative tails at different time intervals are linear in the...

The asset allocation decision often relies upon correlation estimates arising from short-run data. Short-run correlation estimates may, however, be distorted by frictions. In this paper, we introduce a long-run wavelet-based correlation estimator, distinguishing between long-run common behavior...