High-dimensional Statistical Learning Techniques for Time-varying Limit Order Book Networks
52 Pages Posted: 24 Jan 2021 Last revised: 17 Feb 2021
Date Written: January 1, 2020
This paper provides statistical learning techniques for determining the full own-price market impact and the relevance and effect of cross-price and cross-asset spillover channels from intraday transactions data. The novel tools allow extracting comprehensive information contained in the limit order books (LOB) and quantify their impacts on the size and structure of price interdependencies across stocks. For correct empirical network determination of such dynamic liquidity price effects even in small portfolios, we require high-dimensional statistical learning methods with an integrated general bootstrap procedure. We document the importance of LOB liquidity network spillovers even for a small blue-chip NASDAQ portfolio.
Keywords: limit order book, high-dimensional statistical learning, liquidity networks, high frequency dynamics, market impact, bootstrap
JEL Classification: C02, C13, C22, C45, G12
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