Estimating the Order-Flow Component of Security Returns

نویسندگان

  • Kerry Back
  • Kevin Crotty
  • Tao Li
چکیده

We derive a structural model of the amount of private information that is conveyed to the market via order flows. The model is a continuous-time Kyle model in which there is public information arrival and in which the strategic trader may or may not have private information. For empirical implementation, we treat each trading day as a separate instance of the model. Monte Carlo analysis shows that the key parameters are estimated well by maximum likelihood using intraday data over monthly time periods, even in the presence of some misspecification. We illustrate the procedure by estimating the model monthly for a single stock over a twenty-year time frame. Email addresses: [email protected] (Kerry Back), [email protected] (Kevin Crotty), [email protected] (Tao Li)

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تاریخ انتشار 2014