An order flow model and a liquidity measure of financial markets

• Main Author: Kim, Adlar Jeewook
• Other Authors: Tomaso Poggio, Andrew W. Lo and J. Doyne Farmer.
• Format: Others
• Language: English
• Published: Massachusetts Institute of Technology 2009
• Subjects: Electrical Engineering and Computer Science.
• Online Access: http://hdl.handle.net/1721.1/45884

Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Electrical Engineering and Computer Science, 2008. === Includes bibliographical references (leaves 151-157). === The thesis seeks a better understanding of liquidity generation process of financial markets and attempts to find a quantitative measure of market liquidity. Various statistical modeling techniques are introduced to model order flow generation, which is a liquidity generation process of the market. The order flow model successively replicates various statistical properties of price returns including fat-tailed distribution of returns, no autocorrelation of returns and strong positive autocorrelation of transaction signs. While attempting to explain how the order flow model satisfies Efficient Market Hypothesis (EMH), I discovered a method of calibrating market liquidity from order flow data. === by Adlar Jeewook Kim. === Ph.D.