Institute of Information Theory and Automation

Publication details

Estimation of zero-intelligence models by L1 data

Journal Article

Šmíd Martin


serial: Quantitative Finance vol.16, 9 (2016), p. 1423-1444

project(s): GBP402/12/G097, GA ČR

keywords: Limit Order Market, Stochastic Models, Econometric Methods

preview: Download

abstract (eng):

A unit volume zero-intelligence (ZI) model is defined and the distribution of its L1 process is recursively described. Further, a generalized ZI model allowing non-unit market orders, shifts of quotes and general in-spread events is proposed and a formula for the conditional distribution of its quotes is given, together with a formula for price impact. For both the models, MLE estimators are formulated and shown to be consistent and asymptotically normal. Consequently, the estimators are applied to data of six US stocks from nine electronic markets. It is found that more complex variants of the models, despite being significant, do not give considerably better predictions than their simple versions with constant intensities.

RIV: BB

Responsible for information: admin
Last modification: 21.12.2012
Institute of Information Theory and Automation