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Proceedings Paper

Poisson-process generalization for the trading waiting-time distribution in a double-auction mechanism
Author(s): Silvano Cincotti; Linda Ponta; Marco Raberto; Enrico Scalas
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Paper Abstract

In this paper, empirical analyses and computational experiments are presented on high-frequency data for a double-auction (book) market. Main objective of the paper is to generalize the order waiting time process in order to properly model such empirical evidences. The empirical study is performed on the best bid and best ask data of 7 U.S. financial markets, for 30-stock time series. In particular, statistical properties of trading waiting times have been analyzed and quality of fits is evaluated by suitable statistical tests, i.e., comparing empirical distributions with theoretical models. Starting from the statistical studies on real data, attention has been focused on the reproducibility of such results in an artificial market. The computational experiments have been performed within the Genoa Artificial Stock Market. In the market model, heterogeneous agents trade one risky asset in exchange for cash. Agents have zero intelligence and issue random limit or market orders depending on their budget constraints. The price is cleared by means of a limit order book. The order generation is modelled with a renewal process. Based on empirical trading estimation, the distribution of waiting times between two consecutive orders is modelled by a mixture of exponential processes. Results show that the empirical waiting-time distribution can be considered as a generalization of a Poisson process. Moreover, the renewal process can approximate real data and implementation on the artificial stocks market can reproduce the trading activity in a realistic way.

Paper Details

Date Published: 23 May 2005
PDF: 10 pages
Proc. SPIE 5848, Noise and Fluctuations in Econophysics and Finance, (23 May 2005); doi: 10.1117/12.609420
Show Author Affiliations
Silvano Cincotti, Univ. di Genova (Italy)
Linda Ponta, Univ. di Genova (Italy)
Marco Raberto, Univ. di Genova (Italy)
Enrico Scalas, Univ. del Piemonte Orientale (Italy)

Published in SPIE Proceedings Vol. 5848:
Noise and Fluctuations in Econophysics and Finance
Derek Abbott; Jean-Philippe Bouchaud; Xavier Gabaix; Joseph L. McCauley, Editor(s)

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