Resource title

Quantifying the efficiency of the Xetra LOB market: detailed recipe

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Resource description

Motivated by the prominent role of electronic limit order book (LOB) markets in today’s stock market environment, this paper provides the basis for understanding, reconstructing and adopting Hollifield, Miller, Sandas, and Slive’s (2006) (henceforth HMSS) methodology for estimating the gains from trade to the Xetra LOB market at the Frankfurt Stock Exchange (FSE) in order to evaluate its performance in this respect. Therefore this paper looks deeply into HMSS’s base model and provides a structured recipe for the planned implementation with Xetra LOB data. The contribution of this paper lies in the modification of HMSS’s methodology with respect to the particularities of the Xetra trading system that are not yet considered in HMSS’s base model. The necessary modifications, as expressed in terms of empirical caveats, are substantial to derive unbiased market efficiency measures for Xetra in the end.

Resource author

Miriam Sperl

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Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/25556

Resource license

Adapt according to the presented license agreement and reference the original author.