Empirical Market Microstructure: The Institutions, Economics, and Econometrics of Securities Trading

Hardcover | January 18, 2007

byJoel Hasbrouck

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The interactions that occur in securities markets are among the fastest, most information-intensive, and most highly strategic of all economic phenomena. Empirical Market Microstructure is about the institutions that have evolved to handle our trading needs, the economic forces that guide ourstrategies, and statistical methods of using and interpreting the vast amount of information that these markets produce. The empirical methods discussed in the book draw on the power of multivariate linear time series analysis. The book discusses the application of univariate ARMA analysis to trade prices, vector autoregressions to price and order data, and vector error correction models to situations where the samesecurity is traded in many markets. In these models, the tools of random-walk decomposition and co-integration emerge as important to specification and interpretation. The statistical specifications dont simply arise, however, as progressively more refined descriptive models; they have strong economic underpinnings arising from asymmetric information, inventory control, and the strategies of their participants. These topics are discusssed, interleaving with andemphasizing the connection to the statistical models. From a practical viewpoint, many of these models will be estimated to calibrate real-world trading strategies. Some market participants will be trying to discern strategies that generate profits from short-term trading. A much greater number, though, will be trying to accomplish trades that helpdiversify, hedge or reallocate a portfolio. Trading is not, for these agents, their primary economic purpose. They are simply trying to satisfy their trading needs at a minimal cost. The final part of the book discusses how these costs are measured, and strategies to minimize them--both by splittingorders over time, and by the judicious use of limit orders. The book includes numerous exercises; solutions and other supporting materials are available on the author's web site.

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From the Publisher

The interactions that occur in securities markets are among the fastest, most information-intensive, and most highly strategic of all economic phenomena. Empirical Market Microstructure is about the institutions that have evolved to handle our trading needs, the economic forces that guide ourstrategies, and statistical methods of using...

Joel Hasbrouck is the Kenneth G. Langone Professor of Business Administration and Professor of Finance at the Stern School of Business, New York University. In addition to teaching at Stern, he has served as a constultant to the New York Stock Exchange and the American Stock Exchange, and on the scientific adviosry board of ITG, Inc. ...

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Empirical Market Microstructure: The Institutions, Economics, and Econometrics of Securities Trading
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Kobo ebook|Jan 4 2007

$42.39 online$54.99list price(save 22%)
Format:HardcoverDimensions:208 pages, 6.3 × 9.29 × 0.98 inPublished:January 18, 2007Publisher:Oxford University PressLanguage:English

The following ISBNs are associated with this title:

ISBN - 10:0195301641

ISBN - 13:9780195301649

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Table of Contents

1. Introduction2. Trading Mechanisms3. The Roll Model of Trade Prices4. Univariate Time-Series Analysis5. Sequential Trade Models6. Order Flow And The Probability of Informed Trading7. Strategic Trade Models8. A Generalized Roll Model9. Multivariate Linear Microstructure Models10. Multiple Securities and Multiple Prices11. Dealers and Their Inventories12. Limit Order Markets13. Depth14. Trading Costs: Retrospective and Comparative15. Prospective Trading Costs and Execution Strategies

Editorial Reviews

"Joel Hasbrouck provides the first integrated introduction to the most important models of empirical market microstructure. The development is logical and easy to follow. Students and practioners will undoubtedly greatly appreciate the care with which Hasbrouck has identified the strengths andweaknesses of the models, and their relations to each other. This book represents an outstanding synthesis of academic work over the last 20 years. It is--and will long be--the authoritative treatment on the subject."--Larry Harris, Fred V. Keenan Chair in Finance, USC Marshall School of Businessand author of Trading and Exchanges (OUP, 2002)