High Frequency Trading and Limit Order Book Dynamics

<p>This book brings together the latest research in the areas of market microstructure and high-frequency finance along with new econometric methods to address critical practical issues in these areas of research. Thirteen chapters, each of which makes a valuable and significant contribution to the existing literature have been brought together, spanning a wide range of topics including information asymmetry and the information content in limit order books, high-frequency return distribution models, multivariate volatility forecasting, analysis of individual trading behaviour, the analysis of liquidity, price discovery across markets, market microstructure models and the information content of order flow. These issues are central both to the rapidly expanding practice of high frequency trading in financial markets and to the further development of the academic literature in this area. The volume will therefore be of immediate interest to practitioners and academics. </p><p></p><p>This book was originally published as a special issue of <i>European Journal of Finance.</i></p> <p>1. Introduction<i> </i>2. Limit order books and trade informativeness<i> </i>3. A forecast-based comparison of restricted Wishart autoregressive models for realized covariance matrices <i> </i>4. A simple two-component model for the distribution of intraday returns<i> </i>5. Liquidity determination in an order-driven market<i> </i>6. Exchange rate determination and inter-market order flow effects<i> </i>7. Permanent trading impacts and bond yields <i> </i>8. High-frequency information content in end-user foreign exchange order flows<i> </i>9. A detailed investigation of the disposition effect and individual trading behavior: a panel survival approach<i> </i>10. How do individual investors trade?<i> </i>11. On the hidden side of liquidity<i> </i>12. Price discovery in spot and futures markets: a reconsideration<i> </i>13. Optimal informed trading in the foreign exchange market<i> </i>14. The impact of aggressive orders in an order-driven market: a simulation approach</p>