Adaptive order flow forecasting with multiplicative error models

Arbeitspapier

A flexible statistical approach for the analysis of time-varying dynamics of transaction data on financial markets is here applied to intra-day trading strategies. A local adaptive technique is used to successfully predict financial time series, i.e., the buyer and the seller-initiated trading volumes and the order flow dynamics. Analysing order flow series and its information content of mini Nikkei 225 index futures traded at the Osaka Securities Exchange in 2012 and 2013, a data-driven optimal length of local windows up to approximately 1-2 hours is reasonable to capture parameter variations and is suitable for short-term prediction. Our proposed trading strategies achieve statistical arbitrage opportunities and are therefore beneficial for quantitative finance practice.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: SFB 649 Discussion Paper ; No. 2014-035

Classification and Topics

• Classification: Wirtschaft ; Duration Analysis; Optimal Timing Strategies ; Model Construction and Estimation ; Forecasting Models; Simulation Methods ; Asset Pricing; Trading Volume; Bond Interest Rates ; Financial Forecasting and Simulation
• Subject: multiplicative error models ; trading volume ; order flow ; forecasting

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Härdle, Wolfgang Karl ; Mihoci, Andrija ; Ting, Christopher Hian-Ann
• Event: Veröffentlichung
• (who): Humboldt University of Berlin, Collaborative Research Center 649 - Economic Risk
• (where): Berlin
• (when): 2014

Further information

• Handle: http://hdl.handle.net/10419/103805
• Last update: 10.03.2025, 11:46 AM CET