Statistical analysis on market microstructure models Public Deposited

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  • March 21, 2019
  • Liu, Feng
    • Affiliation: College of Arts and Sciences, Department of Statistics and Operations Research
  • The field of market microstructure studies the trading mechanisms and costs of providing transaction services, with their impact on the short run behavior of security prices. Investors are involved in the market for securities and related information. The cost of a trade depends on the asymmetric information possessed by different participants in the trade. In this thesis, we perform empirical studies of stock microstructure data and infer on several market microstructure models. The generalized Roll model (1984) and Hasbrouck's (2009) approach, although considered as a good starting point, are too simple to be realistic. Kyle (1985), Glosten and Milgrom (1985) represent two most important models that involve asymmetric information and transaction costs. We derive a new characterization of Kyle's equilibrium model and develop new algorithms to solve recursive equations with computational efficiency. We also propose an extension of Kyle's model in which the private information is gradually revealed into the security price. Bayesian inference on model unknowns enables us to discover the trading strategies of the informed traders. These approaches facilitate real applications of market microstructure models.
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Rights statement
  • In Copyright
  • Ji, Chuanshu
  • Doctor of Philosophy
Degree granting institution
  • University of North Carolina at Chapel Hill
Graduation year
  • 2010

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