Download This PaperNon-Microstructure Noise
43 Pages Posted: 16 Aug 2018 Last revised: 24 Oct 2020
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Non-Microstructure Noise
A Data Paradigm to Operationalise Expanded Filtration: Realized Volatilities and Kernels from Non-Synchronous NASDAQ Quotes and Trades
Date Written: July 29, 2018
Abstract
High resolution Ultra High Frequency (UHF) quotes and trades are examined to detect patterns which do not correspond to plausible market activity as in Brownlees and Gallo (2006). Non-microstructure noise is identified as a process. Methods of treatment are evaluated. A resultant paradigm of data handling is presented. Empirical evidence from a sample of NASDAQ stocks demonstrates that the removal of non-microstructure noise from the limit order book significantly improves estimation across techniques and all levels of market depth.
Keywords: Robustification, Ultra High Frequency, Data Handling, Microstructure Noise, Non-Microtructure Noise, Data Cleaning, Empirical Estimation, Limit Order Book, Bid Ask Spread, Trades and Quotes, Information Content
JEL Classification: C01, C32, G1
Suggested Citation: Suggested Citation