This study mainly focuses on a series of topics within high frequency data of aprivate limit order book from NASDAQ. The interest of our... Show moreThis study mainly focuses on a series of topics within high frequency data of aprivate limit order book from NASDAQ. The interest of our research first comes from thefamous classical theory “Efficient Market Hypothesis (EMH)”. Given the existence of aseparate market in which high frequency traders compete together under today’senvironment, we show that this market is quite adaptive rather than efficient since thestatistical quantity measuring market efficiency will have fluctuating values in differenttime point, confirmed in our study. Then we explore the linkage between high frequency cancelling activity and marketshort-term volatility (quote volatility). The findings for this topic until now are rather notconclusive yet. In our design, we first use Grange Causality test. It turns out realizedvolatility and cancelling activity granger cause each other, and cancelling activitycontributes tremendously to volatility forecasting. Then we fit our data in a generic ofARCH models to establish the predictability of realized volatility by cancellinginformation. Finally, we take advantage of the cancelling activity to predict real timetrading. We use the VIXY which is an ETF of VIX and focuses on short term performance.We find that the ask side of high frequency trading activities has far more significant impactfor both the level of VIXY and return of VIXY, while the bid side seems to be trivial. At last, we analyze the role of traded volume and trend in technical analysis. Theusefulness of technical analysis has been confirmed in the beginning part of this study byrejecting EMH, then a continuing topic for we to discuss is possible variables which couldcontribute to technical analysis. As known to finance literature, volume is frequently takento validify the trend of stock or discover the reversal of the trend. But now there is oppositeopinion maintaining that the role of volume has become trivial. Our findings complementprevious researches and confirm both the usefulness and the fading of such usefulness oftraded volume. Show less
