Commonality in FX liquidity: High-frequency evidence

Modeling High-Frequency FX Data Dynamics∗

This paper shows that high-frequency, irregularly-spaced, FX data can generate non-normality, conditional heteroskedasticity, and leptokurtosis when aggregated into fixed-interval, calendar time even when these features are absent in the original D.G.P. Furthermore, we introduce a new approach to modeling these high-frequency irregularly spaced data based on the Poisson regression model. The ne...

A Theory of Demand Driven Liquidity Commonality

Co-dependence of Extreme Events in High Frequency FX Returns

In this paper, we investigate extreme events in high frequency, multivariate FX returns within a purposely built framework. We generalize univariate tests and concepts to multidimensional settings and employ these novel techniques for parametric and nonparametric analysis. In particular, we investigate and quantify the co-dependence of cross-sectional and intertemporal extreme events. We find e...

Commonality in Liquidity in Pure Order-Driven Markets∗

This paper extends previous research on commonality in liquidity to pure limit order markets. Using data over three months on the order book of 19 stocks traded at the Swiss Stock Exchange (SWX), we perform a principals components analysis and find evidence of the existence of three to four common factors. The fraction of the variation in liquidity explained by these common factors is higher th...

Examining the Commonality in Liquidity and Volatility Risk

We estimate latent factor models of liquidity and volatility. Common liquidity and volatility factors are extracted using multiple liquidity and volatility measures. Additionally, latent factors are extracted by aggregating across both liquidity and volatility resulting in what we will call the common “uncertainty” factors. We find that volatility and the common uncertainty risk are significant...