High frequency market microstructure noise estimates and liquidity measures

Using recent advances in the econometrics literature, we disentangle from high frequency observations on the transaction prices of a large sample of NYSE stocks a fundamental component and a microstructure noise component. We then relate these statistical measurements of market microstructure noise to observable characteristics of the underlying stocks and, in particular, to different financial measures of their liquidity. We find that more liquid stocks based on financial characteristics have lower noise and noise-to-signal ratio measured from their high frequency returns. We then examine whether there exists a common, market-wide, factor in high frequency stock-level measurements of noise, and whether that factor is priced in asset returns.Comment: Published in at http://dx.doi.org/10.1214/08-AOAS200 the Annals of Applied Statistics (http://www.imstat.org/aoas/) by the Institute of Mathematical Statistics (http://www.imstat.org

On Money as a Substitute for Perfect Recall

In environments with no commitment and with a need for intertemporal trade, bounded recall is shown to be a sufficient friction for a receipt system (fiat money) to lead to improved allocations in an otherwise frictionless Walrasian model. The absence of other frictions makes price determination tractable, thus the model may be used for quantitative monetary policy experiments. Some issues regarding the divisibility of money are also discussed.money, memory, competitive equilibrium

The Lamb shift in the BTZ spacetime

We study the Lamb shift of a two-level atom arising from its coupling to the conformal massless scalar field, which satisfies the Dirichlet boundary conditions, in the Hartle-Hawking vacuum in the BTZ spacetime, and find that the Lamb shift in the BTZ spacetime is structurally similar to that of a uniformly accelerated atom near a perfectly reflecting boundary in (2+1)-dimensional flat spacetime. Our results show that the Lamb shift is suppressed in the BTZ spacetime as compared to that in the flat spacetime as long as the transition wavelength of the atom is much larger than $AdS$ radius of the BTZ spacetime while it can be either suppressed or enhanced if the transition wavelength of the atom is much less than $AdS$ radius. In contrast, the Lamb shift is always suppressed very close to the horizon of the BTZ spacetime and remarkably it reduces to that in the flat spacetime as the horizon is approached although the local temperature blows up there.Comment: 21 pages,2 figure

The Chinese Warrants Bubble

In 2005-08, over a dozen put warrants traded in China went so deep out of the money that they were certain to expire worthless. Nonetheless, each warrant was traded nearly three times each day at substantially inflated prices. This bubble is unique, because the underlying stock prices make the zero warrant fundamentals publicly observable. We find evidence supporting the resale option theory of bubbles: investors overpay for a warrant hoping to resell it at an even higher price to a greater fool. Our study confirms key findings of the experimental bubble literature and provides useful implications for market development.

Thermodynamics of charged accelerating AdS black holes and holographic heat engines

Using a reasonable choice in normalizing the timelike Killing vector, we investigate the thermodynamic properties of charged accelerating Anti-de Sitter (AdS) black holes. We find that the expression of the thermodynamic mass in the first law of thermodynamics displays an inextricably intertwining behavior with the charge due to the unusual asymptotic structure of the accelerating black holes. Meanwhile, the thermodynamic length as a potential conjugate to the varying cosmic string tension is introduced and analyzed in detail, and the possible phase behavior of the charged accelerating black holes is also discussed in a standard thermodynamic analysis. Furthermore, we also investigate the properties of holographic heat engines with charged accelerating AdS black holes as the working substance in a benchmarking scheme. We find that the efficiencies of the black hole heat engines can be influenced by both the size of the benchmark circular cycle and the cosmic string tension. More interestingly, the existence of charge may significantly increase the efficiencies of the black hole heat engines and make them be more sensitive to a varying cosmic string tension. A cross-comparison of the efficiencies of different black hole heat engines suggests that the acceleration also increases the efficiency and renders it more sensitive as the charge varies.Comment: 17 pages,13 figures. Update the material and formula about the charged case which has been removed in arXiv:1801.06811v

High Frequency Market Microstructure Noise Estimates and Liquidity Measures

Using recent advances in the econometrics literature, we disentangle from high frequency observations on the transaction prices of a large sample of NYSE stocks a fundamental component and a microstructure noise component. We then relate these statistical measurements of market microstructure noise to observable characteristics of the underlying stocks, and in particular to different financial measures of their liquidity. We find that more liquid stocks based on financial characteristics have lower noise and noise-to-signal ratio measured from their high frequency returns. We then examine whether there exists a common, market-wide, factor in high frequency stock-level measurements of noise, and whether that factor is priced in asset returns.