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Non-parametric kernel estimation for symmetric Hawkes processes. Application to high frequency financial data

E. Bacry, K. Dayri and J. F. Muzy

Papers from arXiv.org

Abstract: We define a numerical method that provides a non-parametric estimation of the kernel shape in symmetric multivariate Hawkes processes. This method relies on second order statistical properties of Hawkes processes that relate the covariance matrix of the process to the kernel matrix. The square root of the correlation function is computed using a minimal phase recovering method. We illustrate our method on some examples and provide an empirical study of the estimation errors. Within this framework, we analyze high frequency financial price data modeled as 1D or 2D Hawkes processes. We find slowly decaying (power-law) kernel shapes suggesting a long memory nature of self-excitation phenomena at the microstructure level of price dynamics.

Date: 2011-12
New Economics Papers: this item is included in nep-ecm and nep-mst
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