Analysing the market microstructure noise : a nonparametric approach /
Given the rapid development of high-frequency trading strategies in the last two decades, various methods have been proposed for studying return volatility based on high-frequency financial data. However, high-frequency financial data are heavily contaminated by the market microstructure noise compo...
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| Format: | eBook |
| Language: | English |
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London :
SAGE Publications Ltd,
2025.
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| Series: | SAGE research methods. Cases
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| Subjects: | |
| Online Access: | Connect to the full text of this electronic book |
| Summary: | Given the rapid development of high-frequency trading strategies in the last two decades, various methods have been proposed for studying return volatility based on high-frequency financial data. However, high-frequency financial data are heavily contaminated by the market microstructure noise component, which arises due to imperfections in the trading system. Motivated by this, we decided to investigate market microstructure noise and its impact on the price process. With this goal in mind, this project starts with the realization that the observed price process consists of three components: the efficient price, the explicative noise, and the residual noise. Several existing methods were combined to study each component individually. In practice, we found it crucial to preprocess the data to reduce the negative impact of outliers and errors. After cleaning the data, we were able to draw economically meaningful conclusions and gain a better understanding of the mechanism of price formation. This process led to a deeper understanding of utilizing high-frequency financial data and appealed to audiences with diverse backgrounds. |
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| Physical Description: | 1 online resource : illustrations. |
| ISBN: | 9781036209285 1036209288 |