Researchers publish new paper on clustering estimation of price changes in Hawkes models
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Hyoeun Lee released a new paper on Hawkes models estimating price change clustering in consolidated quote feeds, submitted to the Journal of Financial Econometrics. The paper's Hawkes model study of U.S. consolidated quote feeds finds that the sub-millisecond kernel component for large-tick stocks arises from the quote construction mechanism: half of NBBO changes are locked markets or exhausted quotes, corrected within 1 millisecond, and misidentified by the model as excitation. Defining events as mid-price levels persisting for 1 millisecond removes this component; the raw fit has three times the kernel mass within 1 second compared to the clean kernel, a result reproducible via simulation.
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- arXiv q-finEvent Definition and Branching Ratio: Estimating Hawkes Price Change Clustering from Consolidated Quotes
A Hawkes model study of price changes in U.S. consolidated quotes finds that the sub-millisecond kernel component of large-tick stocks arises from quote construction mechanisms. Half of NBBO changes are locked or exhausted quotes that are corrected within 1 millisecond, and are misidentified by the model as excitation.
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