Testing if the market microstructure noise is fully explained by the informational content of some variables from the limit order book

Simon Clinet, Yoann Potiron

Research output: Contribution to journalArticlepeer-review

4 Citations (Scopus)

Abstract

In this paper, we build tests for the presence of residual noise in a model where the market microstructure noise is a known parametric function of some variables from the limit order book. The tests compare two distinct quasi-maximum likelihood estimators of volatility, where the related model includes a residual noise in the market microstructure noise or not. The limit theory is investigated in a general nonparametric framework. In the presence of residual noise, we examine the central limit theory of the related quasi-maximum likelihood estimation approach.

Original languageEnglish
Pages (from-to)289-337
Number of pages49
JournalJournal of Econometrics
Volume209
Issue number2
DOIs
Publication statusPublished - 2019 Apr

Keywords

  • Efficient price
  • Estimation
  • High frequency data
  • Information
  • Integrated volatility
  • Limit order book
  • Market microstructure noise
  • Quasi-maximum likelihood estimator
  • Realized volatility
  • Test

ASJC Scopus subject areas

  • Economics and Econometrics

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