Title: An extended MRR Model for transaction-level analysis of high frequency trading processes
Authors: Qiang Zhang - Beijing Universtiy of Chemical Technology (China) [presenting]
Abstract: A nonparametric test is employed, showing that the Markov property of the trade indicator variables, which is a key assumption in the MRR model, is rejected in most of trading days. Based on the spread decomposed structure, an extended MRR model is proposed as an extension. Empirical results show that the information lag plays an important role and the difference of the adverse selection risk parameter between two models is significant. Further, our analysis suggests that the information lag parameter can be a useful measure of the average speed at which the information integrates into the price.