High Frequency Trading and Limit Order Book Dynamics

Ingmar Nolte is a Reader in Finance at Lancaster University, UK. He held positions before at the University of Warwick, UK, and the University of Konstanz, Germany. His core research area is Financial Econometrics; he has published articles in the leading journals including the Journal of Business & Economics Statistics, Journal of Financial Econometrics and the Journal of Applied Econometrics. Mark Salmon is Senior Scientist at BHDG Systematic Trading and has been a Visiting Professor at Cambridge University, UK, for the last three years Prior to joining BHDG he was Professor of Finance at Warwick Business School, UK, and prior to that a Professor at Cass Business School, UK, and the European University Institute, Italy. He has published widely in Finance, Economics, Econometrics and Statistics with papers in Econometrica, The Annals of Statistics, The Journal of Econometrics, The Economic Journal, The Journal of Financial Markets, The Journal of Empirical Finance amongst other places. He has also consulted with a number of financial institutions for many years and was an advisor at the Bank of England for six years. Chris Adcock is Professor of Financial Econometrics at the University of Sheffield, UK, and visiting Professor of Quantitative Finance at the University of Southampton, UK. Research interests are in portfolio selection, asset pricing theory and the development of quantitative techniques for portfolio management. He has acted as advisor to several international investment managers. He is founding editor of The European Journal of Finance and has been associate editor of several finance journals and Series C and D of the Journal of the Royal Statistical Society. Current research projects are in downside risk, portfolio selection, skewness and option returns, with collaborations with universities in the UK, the European Union and China.

1. Introduction 2. Limit order books and trade informativeness 3. A forecast-based comparison of restricted Wishart autoregressive models for realized covariance matrices 4. A simple two-component model for the distribution of intraday returns 5. Liquidity determination in an order-driven market 6. Exchange rate determination and inter-market order flow effects 7. Permanent trading impacts and bond yields 8. High-frequency information content in end-user foreign exchange order flows 9. A detailed investigation of the disposition effect and individual trading behavior: a panel survival approach 10. How do individual investors trade? 11. On the hidden side of liquidity 12. Price discovery in spot and futures markets: a reconsideration 13. Optimal informed trading in the foreign exchange market 14. The impact of aggressive orders in an order-driven market: a simulation approach