A Continuous-Time Measurement of the Buy-Sell Pressure in a Limit Order Book Market

In this paper, we investigate the buy and sell arrivl process in a limit order book market. Using an intensity framework allows to estimate the simultaneous buy and sell intensity and to derive a continuous-time measure for the buy-sell pressure in the market. Based on limit order book data from the Australian Stock Exchange (ASX), we show that the buy-sell pressure is particularly influenced by recent market and limit orders and the current depth in the ask and bid queue. We find evidence for the hypothesis that traders use order book information in order to infer from the price setting behavior of market participants. Furthermore, our results indicate that the buy-sell pressure is clearly predictable and is a significant determinant of trade-to-trade returns and volatility.buy and sell arrival process; order book information; market depth; bivariate autoregressive intensity model; buy-sell exces intensity

A Continuous-Time Measurement of the Buy-Sell Pressure in a Limit Order Book Market

In this paper, we investigate the buy and sell arrival process in a limit order book market. Using an intensity framework allows to estimate the simultaneous buy and sell intensity and to derive a continuous-time measure for the buy-sell pressure in the market. Based on limit order book data from the Australian Stock Exchange (ASX), we show that the buy-sell pressure is particularly influenced by recent market and limit orders and the current depth in the ask and bid queue. We find evidence for the hypothesis that traders use order book information in order to infer from the price setting behavior of market participants. Furthermore, our results indicate that the buy-sell pressure is clearly predictable and is a significant determinant of trade-to-trade returns and volatility.buy and sell arrival process; order book information; market depth; bivariate autoregressive intensity model; buy-sell excess intensity

A Survival Analysis of Australian Equity Mutual Funds

Determining which types of mutual (or managed) investment funds are good financial investments is complicated by potential surbivorship biases. This project adds to a small recent international literature on the patterns and determinants of mutual fund survivorship. We use statistical techniques for survival data that are rarely applied in finance. Of specific interest is the hazard rate of fund closure, which gives the variation over time in the conditional probability of fund closure given fund survival to date. For a sample of 251 retail investment funds in Australia from 1980 to 1999 we identify a hump-shaped hazard function that reaches its maximum after about five or six years, a pattern similar to the UK findings of Lunde, Timmermann and Blake (1999). We also consider the impact of monthly and annual fund performance (gross and relative to a market benchmark). Returns relative to the benckmark are much more important than gross returns, with hgiher relative returns associated with lower hazard of fund closure. There appears to be an asymmetric response to performance, with positive shocks having a larger impact on the hazard rate than negative shocks.mutual funds; survivorship bias; duration analysis; cox regression

Using Bayesian variable selection methods to choose style factors in global stock return models

This paper applies Bayesian variable selection methods from the statistics literature to give guidance in the decision to include/omit factors in a global (linear factor) stock return model. Once one has accounted for country and sector, it is possible to see which style or styles best explains current asset returns. This study does not find compelling evidence for global styles as useful explanatory factors, once country and sector have been accounted for

Limits to Linear Price Behaviour: Target Zones for Futures Prices Regulated By Limits

This paper analyzes the random walk behaviour of futures prices when the exchange regulated by price limits. Using a model analogous to exchange rate target zone models, the study tests for the existence of a nonlinear S-shape relation between observed and theoretical futures prices. This phenomenon reflects the adjustment in traders' expectations even when limits are not actually hit. The approach is illustrated for five agricultural futures contracts traded at the Chicago Board of Trade. There is some evidence of nonlinearity in quiet periods. In cases of fundamental realignments, that is volatile periods, this non-liearity disappears.price limits; target zones; gravitation; mean reversion

Migration of Price Discovery With Constrained Futures Markets

This paper investigates the information content of futures option prices when the futures price is regulated while the futures option price itself is not. The New York Board of Trade provides the empirical setting for this type of dichotomy in regulation. Most commodity derivatives markets regulate prices of all derivatives on a particular commodity simultaneously. NYBOT has taken an almost unique position by imposing daily price limits on their futures contracts while leaving the options prices on these futures contracts unconstrained. The study takes a particular interest in the volatility and futures prices of the options-implied risk neutral density when the underlying futures contract is locked limit.option implied density; price limits

Modelling Adverse Selection on Electronic Order-Driven Markets

The vast majority of models that decompose the bid/ask spread assume the quote-driven, specialist structure of the NYSE. This paper critically evaluates these models to construct a model specific for an electronic order-driven exchange. The model not only captures adverse selection and the impact of order flows on price discovery but it includes the imbalance of supply and demand inherent in the public limit order book. With this new model we investigate the change to anonymity on the Australian Securities Exchange (ASX). Following the change to anonymity, both adverse selection and the demand/supply imbalance have an increased impact on prices while order flow has a decreased influence, suggesting the change to anonymity has improved market efficiency. The model also uncovers a change in traders’ behavior once their fear of front-running is reduced. We show that the model is stable and robust across high liquidity stocks as well as stocks with as few as 5 trades per day.bid-ask spread models; adverse selection; anonymity

Using Bayesian Variable Selection Methods to Choose Style Factors in Global Stock Return

This paper applies Bayesian variable selection methods from the statistics literature to give guidance in the decision to include/omit factors in a global (linear factor) stock return model. Once one has accounted for country and sector, it is possible to see which style or styles best explains current asset returns. This study does not find compelling evidence for global styles, once country and sector have been accounted for.

Compact Modeling for a Double Gate MOSFET

MOSFETs (metal-oxide-silicon field-effect transistors) are an integral part of modern electronics. Improved designs are currently under investigation, and one that is promising is the double gate MOSFET. Understanding device characteristics is critical for the design of MOSFETs as part of design tools for integrated circuits such as SPICE. Current methods involve the numerical solution of PDEs governing electron transport. Numerical solutions are accurate, but do not provide an appropriate way to optimize the design of the device, nor are they suitable for use in chip simulation software such as SPICE. As chips contain more and more transistors, this problem will get more and more acute. There is hence a need for analytic solutions of the equations governing the performance of MOSFETs, even if these are approximate. Almost all solutions in the literature treat the long-channel case (thin devices) for which the PDEs reduce to ODEs. The goal of this problem is to produce analytical solutions based on the underlying PDEs that are rapid to compute (e.g. require solving only a small number of algebraic equations rather than systems of PDEs). Guided by asymptotic analysis, a fast numerical procedure has been developed to obtain approximate solutions of the governing PDEs governing MOSFET properties, namely electron density, Fermi potential and electrostatic potential. The approach depends on the channel’s being long enough, and appears accurate in this limit