Essays on Financial Economics
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Authors
Xu, Ke
Date
Type
thesis
Language
eng
Keyword
Financial Market Efficiency , High Frequency Trading , Fractional Cointegration , Futures Market , Vector Error Correction Model , Adverse Selection , Price Discovery
Alternative Title
Abstract
This thesis contains three essays spanning the fields of financial market microstructure and empirical finance. The first essay focuses on reviewing the recent key innovations in trading technology–high frequency trading. I developed a theoretical model to shed light on the effects of high frequency trading on market liquidity especially during stressed market conditions. Many investors and regulators are concerned that high frequency liquidity provision is selective and limited to periods of low stress. However, I find that high frequency liquidity providers improve market liquidity especially during high volatility periods because speed can help to mitigate the market friction caused by asymmetric information. The second and third essays examine applications of a recently developed fractionally cointegrated vector autoregressive (FCVAR) model to commodity spot and futures price data. The second essay, co-authored with Sepideh Dolatabadi and Morten Ø. Nielsen, investigates the contribution of commodity spot and futures markets to price discovery using a FCVAR model. Compared to the results from the non-fractional model, we find slightly more evidence of price discovery in the commodity spot market. The third essay, co-authored with Sepideh Dolatabadi, Paresh K. Narayan and Morten Ø. Nielsen, focuses on forecasting commodity spot and futures returns using FCVAR models and examining the profitability of a dynamic (mean-variance) trading strategy based on the FCVAR forecasts. We generally find that the fractional model generates higher profits on average compared to the non-fractional CVAR model.
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CC0 1.0 Universal
Queen's University's Thesis/Dissertation Non-Exclusive License for Deposit to QSpace and Library and Archives Canada
ProQuest PhD and Master's Theses International Dissemination Agreement
Intellectual Property Guidelines at Queen's University
Copying and Preserving Your Thesis
This publication is made available by the authority of the copyright owner solely for the purpose of private study and research and may not be copied or reproduced except as permitted by the copyright laws without written authority from the copyright owner.
Queen's University's Thesis/Dissertation Non-Exclusive License for Deposit to QSpace and Library and Archives Canada
ProQuest PhD and Master's Theses International Dissemination Agreement
Intellectual Property Guidelines at Queen's University
Copying and Preserving Your Thesis
This publication is made available by the authority of the copyright owner solely for the purpose of private study and research and may not be copied or reproduced except as permitted by the copyright laws without written authority from the copyright owner.