Empirical market microstructure

THE INTERACTIONS that occur in securities markets are among the fastest, most information intensive, and most highly strategic of all eco nomic phenomena. Empirical Market Micro structure is about the institutions that have evolved to handle our trading needs, the eco nomic forces that guide our strategies, and statistical methods of using and interpreting the vast amount of information that these mar kets produce. The empirical methods discussed in the book draw on the power of multivariate linear time series analysis. The book discusses the application of univariane ARMA analysis to trade prices, vector agressions to price and onder dats, and vector error correction models to sinuutions where the same security in trad in many markets. In these models, she tools of random walk decomposition and co-inegration emerge as important to specification and inter petation. The statistical specifications don't simply arise, however, as progressively more refined descripcis models they have strong watomic underpinnings arising from asyms music information, insentory control, and d wages of their participants. These topics an discussed, innerlering with and emphasing de connection to the matical models. From s practical viewpoint, many of these models will be onimated to calbea eal-world reading strategies. Some market participants will be trying to doces serangies that generate peshes from short-term saling A mach greater num bet, though, will be trying to accomplish trades that help divenify hedgr, or mallocate a portfo la Trading is not, for these agents, their pri mary economic purpose. They are simply trying to satisfy their trading needs at a minimal cost The final part of the book uses how these costs are measured and to minimize them-both by splitting det over time, and by the judicious use of limit onder. The book includes numerous exercises solutions and other supporting materials are available on the author's web site.