High frequency market microstructure noise estimates and liquidity measures

Yacine A\"it-Sahalia and Jialin Yu
Authors registered in the RePEc Author Service: Yacine Ait-Sahalia

Papers from arXiv.org

Abstract: Using recent advances in the econometrics literature, we disentangle from high frequency observations on the transaction prices of a large sample of NYSE stocks a fundamental component and a microstructure noise component. We then relate these statistical measurements of market microstructure noise to observable characteristics of the underlying stocks and, in particular, to different financial measures of their liquidity. We find that more liquid stocks based on financial characteristics have lower noise and noise-to-signal ratio measured from their high frequency returns. We then examine whether there exists a common, market-wide, factor in high frequency stock-level measurements of noise, and whether that factor is priced in asset returns.

Date: 2009-06
New Economics Papers: this item is included in nep-fmk and nep-mst
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (47)

Published in Annals of Applied Statistics 2009, Vol. 3, No. 1, 422-457

Downloads: (external link)
http://arxiv.org/pdf/0906.1444 Latest version (application/pdf)

Related works:
Working Paper: High Frequency Market Microstructure Noise Estimates and Liquidity Measures (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:arx:papers:0906.1444

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().