Revealing Intraday Market Efficiency -- Estimating Diurnal Price Densities in Limit Order Books

Author

Jiang, Jian ; Ng, Wing Lon

Author_Institution

Centre for Comput. Finance & Economic Agents, Univ. of Essex, Colchester, UK

fYear

2009

fDate

17-20 April 2009

Firstpage

8

Lastpage

12

Abstract

Liquidity plays an important role in trading and represents a nontrivial economic concept that is difficult to measure as it involves several three dimensions to investigate. In this paper, we explore the liquidity in electronic markets by estimating a time-varying gamma distribution of volume adjusted prices for both bid and ask side of in the order book. Applying this framework on London Stock Exchange SETS order books during the continuous trading hours, we found a seasonal behaviour for the distribution parameters, implying a certain periodic intraday pattern of the market´s liquidity and, hence, its efficiency.

Keywords

economics; gamma distribution; pricing; stock markets; diurnal price density; economics; electronic markets; intraday market efficiency; market liquidity; order book; periodic intraday pattern; time-varying gamma distribution; trading; volume adjusted prices; Books; Consumer electronics; Costs; Density measurement; Finance; Frequency; Microstructure; Real time systems; Stock markets; Gamma distribution; Ultra high frequency transaction data; information distribution; limit order book; price density;

fLanguage

English

Publisher

ieee

Conference_Titel

Information and Financial Engineering, 2009. ICIFE 2009. International Conference on

Conference_Location

Singapore

Print_ISBN

978-0-7695-3606-4

Type

conf

DOI

10.1109/ICIFE.2009.27

Filename

5189959