A aplicação de redes neuronais na deteção da influência do High Frequency Trading na negociação de ações (caso português)

Dissertação apresentada como requisito parcial para obtenção do grau de Mestre em Estatística e Gestão da Informação

Modelo da dinâmica de um livro de ordens para aplicações em high-frequency trading

As operações de alta frequência (High-Frequency Trading - HFT) estão crescendo cada vez mais na BOVESPA (Bolsa de Valores de São Paulo), porém seu volume ainda se encontra muito atrás do volume de operações similares realizadas em outras bolsas de relevância internacional. Este trabalho pretende criar oportunidades para futuras aplicações e pesquisas nesta área. Visando aplicações práticas, este trabalho foca na aplicação de um modelo que rege a dinâmica do livro de ordens a dados do mercado brasileiro. Tal modelo é construído com base em informações do próprio livro de ordens, apenas. Depois de construído o modelo, o mesmo é utilizado em uma simulação de uma estratégia de arbitragem estatística de alta frequência. A base de dados utilizada para a realização deste trabalho é constituída pelas ordens lançadas na BOVESPA para a ação PETR4.

Industry analysis of the high frequency trading industry : an assessment of the industry boundaries, environment and strategic options

O Mercado Acionário Americano evoluiu rapidamente na última década. Este tornou-se uma arquitetura aberta em que participantes com tecnologia inovadora podem competir de forma eficaz. Várias mudanças regulatórias e inovações tecnológicas permitiram mudanças profundas na estrutura do mercado. Essas mudanças, junto com o desenvolvimento tecnológico de redes de alta velocidade, agiu como um catalisador, dando origem a uma nova forma de negociação, denominada Negociação em Alta Frequência (HFT). As empresas de HFT surgiram e se apropriaram em larga escala do negócio de formação de mercado, no fornecimento de liquidez. Embora HFT tem crescido massivamente, ao longo dos últimos quatro anos, HFT perdeu rentabilidade significativamente, uma vez que mais empresas aderiram ao setor reduzindo as margens. Portanto, diante deste contexto, esta tese buscou apresentar uma breve revisão sobre a atividade de HFT, seguida de uma análise dos limites deste setor, bem como, das características do macroambiente do HFT. Para tanto, a tese realizou uma extensa revisão do histórico literário, documentos públicos qualitativos, tais como, jornais, atas de reunião e relatórios oficiais. A tese empregou um ferramental de análise, Barreiras de Entrada e Mobilidade (Porter, 1980); Modelos de Evolução Setorial (McGahan, 2004); Estrutura do Setor de Informação Intensiva (Sampler, 1998), para analisar os limites do setor de HFT. Adicionalmente, empregou as ferramentas de análise, Modelos de Evolução Setorial (McGahan, 2004) e PESTEL (JOHNSON, SCHOLES, and WHITTINGTON, 2011), para analisar o setor e o contexto que envolve o negócio de HFT. A análise concluiu que as empresas que empregam HFT para atuar e competir no mercado acionário, compoem um setor independente.

Volume-Synchronized Probability of Informed Trading (VPIN), Market Volatility, and High-Frequency Liquidity

We assess the predictive ability of three VPIN metrics on the basis of two highly volatile market events of China, and examine the association between VPIN and toxic-induced volatility through conditional probability analysis and multiple regression. We examine the dynamic relationship on VPIN and high-frequency liquidity using Vector Auto-Regression models, Granger Causality tests, and impulse response analysis. Our results suggest that Bulk Volume VPIN has the best risk-warning effect among major VPIN metrics. VPIN has a positive association with market volatility induced by toxic information flow. Most importantly, we document a positive feedback effect between VPIN and high-frequency liquidity, where a negative liquidity shock boosts up VPIN, which, in turn, leads to further liquidity drain. Our study provides empirical evidence that reflects an intrinsic game between informed traders and market makers when facing toxic information in the high-frequency trading world.

Detecting intraday periodicities with application to high frequency exchange rates

Many recent papers have documented periodicities in returns, return volatility, bid–ask spreads and trading volume, in both equity and foreign exchange markets. We propose and employ a new test for detecting subtle periodicities in time series data based on a signal coherence function. The technique is applied to a set of seven half-hourly exchange rate series. Overall, we find the signal coherence to be maximal at the 8-h and 12-h frequencies. Retaining only the most coherent frequencies for each series, we implement a trading rule that is based on these observed periodicities. Our results demonstrate in all cases except one that, in gross terms, the rules can generate returns that are considerably greater than those of a buy-and-hold strategy, although they cannot retain their profitability net of transactions costs. We conjecture that this methodology could constitute an important tool for financial market researchers which will enable them to detect, quantify and rank the various periodic components in financial data better.

Measuring Tail Risks at High Frequency

I develop a new methodology for measuring tail risks using the cross section of bid-ask spreads. Market makers embed tail risk information into spreads because (1) they lose to arbitrageurs when changes to asset values exceed the cost of liquidity and (2) underlying price movements and potential costs are linear in factor loadings. Using this insight, simple cross-sectional regressions relating spreads and trading volume to factor betas can recover tail risks in real time for priced or non-priced return factors. The methodology disentangles financial and aggregate market risks during the 2007-2008 Financial Crisis; anticipates jump risks associated with Federal Open Market Committee announcements; and quantifies a sharp, temporary increase in market tail risk before and throughout the 2010 Flash Crash. The recovered time series of implied market risks also aligns closely with both realized market jumps and the VIX.

Measuring, Modeling, and Forecasting Volatility and Correlations from High-Frequency Data

This dissertation contains four essays that all share a common purpose: developing new methodologies to exploit the potential of high-frequency data for the measurement, modeling and forecasting of financial assets volatility and correlations. The first two chapters provide useful tools for univariate applications while the last two chapters develop multivariate methodologies. In chapter 1, we introduce a new class of univariate volatility models named FloGARCH models. FloGARCH models provide a parsimonious joint model for low frequency returns and realized measures, and are sufficiently flexible to capture long memory as well as asymmetries related to leverage effects. We analyze the performances of the models in a realistic numerical study and on the basis of a data set composed of 65 equities. Using more than 10 years of high-frequency transactions, we document significant statistical gains related to the FloGARCH models in terms of in-sample fit, out-of-sample fit and forecasting accuracy compared to classical and Realized GARCH models. In chapter 2, using 12 years of high-frequency transactions for 55 U.S. stocks, we argue that combining low-frequency exogenous economic indicators with high-frequency financial data improves the ability of conditionally heteroskedastic models to forecast the volatility of returns, their full multi-step ahead conditional distribution and the multi-period Value-at-Risk. Using a refined version of the Realized LGARCH model allowing for time-varying intercept and implemented with realized kernels, we document that nominal corporate profits and term spreads have strong long-run predictive ability and generate accurate risk measures forecasts over long-horizon. The results are based on several loss functions and tests, including the Model Confidence Set. Chapter 3 is a joint work with David Veredas. We study the class of disentangled realized estimators for the integrated covariance matrix of Brownian semimartingales with finite activity jumps. These estimators separate correlations and volatilities. We analyze different combinations of quantile- and median-based realized volatilities, and four estimators of realized correlations with three synchronization schemes. Their finite sample properties are studied under four data generating processes, in presence, or not, of microstructure noise, and under synchronous and asynchronous trading. The main finding is that the pre-averaged version of disentangled estimators based on Gaussian ranks (for the correlations) and median deviations (for the volatilities) provide a precise, computationally efficient, and easy alternative to measure integrated covariances on the basis of noisy and asynchronous prices. Along these lines, a minimum variance portfolio application shows the superiority of this disentangled realized estimator in terms of numerous performance metrics. Chapter 4 is co-authored with Niels S. Hansen, Asger Lunde and Kasper V. Olesen, all affiliated with CREATES at Aarhus University. We propose to use the Realized Beta GARCH model to exploit the potential of high-frequency data in commodity markets. The model produces high quality forecasts of pairwise correlations between commodities which can be used to construct a composite covariance matrix. We evaluate the quality of this matrix in a portfolio context and compare it to models used in the industry. We demonstrate significant economic gains in a realistic setting including short selling constraints and transaction costs.

Recalled and recorded bowel habits confirm early onset and high frequency of constipation in day-care nursery children

CONTEXT: Mothers recall early-onset constipation in children attending gastroenterology clinics. OBJECTIVES: To study the bowel habit of young children in the community to determine, first, whether early-onset constipation is confirmed in this setting and, second, the agreement between recalled and recorded bowel habit. METHODS:Defecation data of 57 children aged 6.0-40.7 mo were obtained by maternal recall (questionnaire on predominant stool characteristics) and by record (1,934 defecations registered prospectively at home and in the nursery). The bowel habit was classified according to stool frequency and proportion of stool characteristics (soft, hard and/or runny). Two criteria were used to classify recorded data, since the cutoff point for hard stools to identify constipation is undefined in children: predominant criterion and adult criterion, respectively with >50% and >25% of stools with altered consistency. Bowel habit categories were: adequate, constipation, functional diarrhea and "other bowel habit". Nonparametric statistics, and the Kappa index for agreement between recalled and recorded bowel habit, were used. RESULTS: Constipation occurred in 17.5%, 10.5%, 19.3% of the children by recall, the predominant and the adult criteria, respectively. Constipation was the main recalled alteration, vs 12.3% "other bowel habit". Only one child classified as having functional diarrhea (by the adult criterion). Agreement between recalled and recorded bowel habit was fair for constipation, by the predominant and the adult criteria (K = 0.28 and 0.24, respectively), but only slight (K <0.16) for other bowel habit categories. Individual data, however, pointed to a better relationship between recalled constipation and the adult rather than the predominant criterion. CONCLUSIONS: Frequent early-onset constipation was confirmed. Fair agreement between recalled and recorded constipation by the two used criteria indicates that recalled data are quite reliable to detect constipation.

Complex kinetics, high frequency oscillations and temperature compensation in the electro-oxidation of ethylene glycol on platinum

Despite the fact that the majority of the catalytic electro-oxidation of small organic molecules presents oscillatory kinetics under certain conditions, there are few systematic studies concerning the influence of experimental parameters on the oscillatory dynamics. Of the studies available, most are devoted to C1 molecules and just some scattered data are available for C2 molecules. We present in this work a comprehensive study of the electro-oxidation of ethylene glycol on polycrystalline platinum surfaces and in alkaline media. The system was studied by means of electrochemical impedance spectroscopy, cyclic voltammetry, and chronoamperometry, and the impact of parameters such as applied current, ethylene glycol concentration, and temperature were investigated. As in the case of other parent systems, the instabilities in this system were associated with a hidden negative differential resistance, as identified by impedance data. Very rich and robust dynamics were observed, including the presence of harmonic and mixed mode oscillations and chaotic states, in some parameter region. Oscillation frequencies of about 16 Hz characterized the fastest oscillations ever reported for the electro-oxidation of small organic molecules. Those high frequencies were strongly influenced by the electrolyte pH and far less affected by the EG concentration. The system was regularly dependent on temperature under voltammetric conditions but rather independent within the oscillatory regime.

High frequency tendon reflexes in the human soleus muscle

Tendon reflexes have been often used in studies of the human nervous system in health and disease. They have been investigated either in response to single tendon taps or to long duration vibrations. Tendon reflexes are described here in response to a high frequency vibration burst (3 cycles of a 100 Hz sine wave) applied to the Achilles tendon of standing subjects, either in quiet stance or during a forward leaning posture. The electromyogram from the soleus muscle usually showed three components separated by 10 ms which were interpreted as being three reflexes, each reflex induced by each of the three cycles in a burst. This result indicates that soleus tendon reflexes can respond in fast succession in a phasic manner when a brief high frequency vibration is applied to the Achilles tendon. This occurs in spite of possible depression of the la to motoneuron synapses and the long after hyperpolarization of the motoneurons. An interpretation of the results is that motoneurons from different subsets of the motoneuron pool respond to different cycles of the sinusoidal vibratory burst. (c) 2008 Elsevier Ireland Ltd. All rights reserved.

High frequency (1000 Hz) tympanometry in normal neonates

The characteristics of high frequency (1000 Hz) acoustic admittance results obtained from normal neonates were described in this study. Participants were 170 healthy neonates (96 boys and 74 girls) aged between 1 and 6 days (mean = 3.26 days, SD = 0.92). Transient evoked otoacoustic emissions (TEOAEs), and 226 Hz and 1000 Hz probe tone tympanograms were obtained from the participants using a Madsen Capella OAE/middle ear analyser. The results showed that of the 170 neonates, 34 were not successfully tested in both ears, 14 failed the TEOAE screen in one or both ears, and 122 (70 boys, 52 girls) passed the TEOAE screen in both ears and also maintained an acceptable probe seal during tympanometry. The 1000 Hz tympanometric data for the 122 neonates (244 ears) showed a single-peaked tympanogram in 225 ears (92.2 %), a flat-sloping tympanogram in 14 ears (5.7 %), a double-peaked tympanogram in 3 ears (1.2 %) and other unusual shapes in 2 ears (0.8 %). There was a significant ear effect, with right ears showing significantly higher mean peak compensated static admittance and tympanometric width, but lower mean acoustic admittance at +200 daPa and gradient than left ears. No significant gender effects or its interaction with ear were found. The normative tympanometric data derived from this cohort may serve as a guide for detecting middle ear dysfunction in neonates.

Continuous high-frequency turbulence and suspended sediment concentration measurements in an upper estuary

The present study details new turbulence field measurements conducted continuously at high frequency for 50 hours in the upper zone of a small subtropical estuary with semi-diurnal tides. Acoustic Doppler velocimetry was used, and the signal was post-processed thoroughly. The suspended sediment concentration wad further deduced from the acoustic backscatter intensity. The field data set demonstrated some unique flow features of the upstream estuarine zone, including some low-frequency longitudinal oscillations induced by internal and external resonance. A striking feature of the data set is the large fluctuations in all turbulence properties and suspended sediment concentration during the tidal cycle. This feature has been rarely documented.

High-Frequency Turbulence and Sediment Flux Measurements in an Upper Estuarine Zone

In natural estuaries, the predictions of scalar dispersion are rarely predicted accurately because of a lack of fundamental understanding of the turbulence structure in estuaries. Herein detailed turbulence field measurements were conducted continuously at high frequency for 50 hours in the upper zone of a small subtropical estuary with semi-diurnal tides. Acoustic Doppler velocimetry was deemed the most appropriate measurement technique for such shallow water depths (less than 0.4 m at low tides), and a thorough post-processing technique was applied. In addition, some experiments were conducted in laboratory under controlled conditions using water and soil samples collected in the estuary to test the relationship between acoustic backscatter strength and suspended sediment load. A striking feature of the field data set was the large fluctuations in all turbulence characteristics during the tidal cycle, including the suspended sediment flux. This feature was rarely documented.

High-Frequency Suspended Sediment Flux Measurements in a Small Estuary

In small estuaries, the predictions of scalar dispersion can rarely be predicted accurately because of a lack of fundamental understanding of the turbulence structure. Herein detailed turbulence measurements and suspended sediment concentrations were conducted simultaneously and continuously at high-frequency for 50 hours per investigation in a small subtropical estuary with semi-diurnal tides. The data analyses provided an unique characterisation of the turbulent mixing processes and suspended sediment fluxes. The turbulence was neither homogeneous nor isotropic, and it was not a Gaussian process. The integral time scales for turbulence and suspended sediment concentration were about equal during flood tides, but differed significantly during ebb tides. The field experiences showed that the turbulence measurements must be conducted at high-frequency to characterise the small eddies and the viscous dissipation process, while a continuous sampling was necessary to characterise the time-variations of the instantaneous velocity field, Reynolds stress tensor and suspended sediment flux during the tidal cycles.

High-frequency acousto-electric single-photon source

We propose a single optical photon source for quantum cryptography based on the acoustoelectric effect. Surface acoustic waves (SAWs) propagating through a quasi-one-dimensional channel have been shown to produce packets of electrons that reside in the SAW minima and travel at the velocity of sound. In our scheme, the electron packets are injected into a p-type region, resulting in photon emission. Since the number of electrons in each packet can be controlled down to a single electron, a stream of single- (or N-) photon states, with a creation time strongly correlated with the driving acoustic field, should be generated.