Microstructure data typically consist of trades and bid and offer quotes for financial securities that are collected at fine sampling intervals (often within the day). This paper reviews approaches taken to modeling these data. The emphasis is on the techniques of stationary multivariate time...

Continuous security markets evolve as a sequence of timed events. This study is adescriptive analysis of NYSE market data in which trades, quote revisions and orders areconsidered to constitute a stationary multivariate point process, which can be analyzed by standard time- and frequency-domain...

This paper is an empirical analysis of trading activity on the Island ECN, an electronic communications network for US equities, which is organized as an electronic limit order book. The approach is cross-sectional across firms. The goal is to characterize the firm-specific determinants of...

The market for US equity indexes has traditionally comprised floor-traded index futures contracts and the individual markets for the component stocks. This picture has been altered by the advent of exchange-traded funds (ETFs) that mirror the indexes, electronically-traded, small-denomination...

This paper describes a general approach to the estimation of security price dynamics when the phenomena of interest are of the same scale or smaller than the tick size. The model views discrete bid and ask quotes as arising from three continuous random variables: the efficient price of the...

The principle that revisions to the expectation of a security's value should be unforecastable identifies this expectation as a martingale. When price changes can plausibly be assumed covariance stationary, this in turn motivates interest in the random walk. In the presence of the market...

This analysis models discrete quotes as arising from two continuous random variables, the efficient price and a cost of quote exposure (information and processing costs). The former less the latter rounded down to the next tick yields the bid; the former plus the latter rounded up yields the ask....

Motivated by economic models of sequential trade, empirical analyses of market dynamics in the U.S. equities market frequently estimate liquidity from regressions of price changes on transaction volumes, where the latter are signed (positive for buyer-initiated trades; negative for...

This paper proposes a dynamic model of bid and ask quotes that incorporates a stochastic cost of market-making, discreteness (restriction of quotes to a fixed grid) and clustering (the tendency ofquotes to lie on acirc;not;Snaturalacirc;not;? multiples of the tick size). The Gibbs sampler provides...

This paper describes a general approach to the estimation of security price dynamics when the phenomena of interest are of the same scale or smaller than the tick size. The model views discrete bid and ask quotes as arising form the three continuous random variables: the efficient price of the...