EconPapers    
Economics at your fingertips  
 

The statistical significance of multivariate Hawkes processes fitted to limit order book data

Roger Martins and Dieter Hendricks

Papers from arXiv.org

Abstract: Hawkes processes have seen a number of applications in finance, due to their ability to capture event clustering behaviour typically observed in financial systems. Given a calibrated Hawkes process, of concern is the statistical fit to empirical data, particularly for the accurate quantification of self- and mutual-excitation effects. We investigate the application of a multivariate Hawkes process with a sum-of-exponentials kernel and piecewise-linear exogeneity factors, fitted to liquidity demand and replenishment events extracted from limit order book data. We consider one-, two- and three-exponential kernels, applying various tests to ascertain goodness-of-fit and stationarity of residuals, as well as stability of the calibration procedure. In line with prior research, it is found that performance across all tests improves as the number of exponentials is increased, with a sum-of-three-exponentials yielding the best fit to the given set of coupled point processes.

New Economics Papers: this item is included in nep-pke
Date: 2016-04, Revised 2016-04
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (2) Track citations by RSS feed

Downloads: (external link)
http://arxiv.org/pdf/1604.01824 Latest version (application/pdf)

Related works:
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:1604.01824

Access Statistics for this paper

More papers in Papers from arXiv.org
Series data maintained by arXiv administrators ().

 
Page updated 2017-09-29
Handle: RePEc:arx:papers:1604.01824