Market Microstructure -- Contents -- Introduction -- About the Editors -- PART I ECONOMIC MICROSTRUCTURE THEORY -- 1 Algorithmic Trading: Issues and Preliminary Evidence -- 1.1 Introduction -- 1.2 What is algorithmic trading? -- 1.2.1 Definition and typology -- 1.2.2 Scope and profitability -- 1.3 Market structure and algorithmic trading -- 1.4 Costs and benefits of algorithmic trading -- 1.4.1 Algorithmic trading reduces search costs -- 1.4.2 Algorithmic trading has an ambiguous effect on adverse selection costs -- 1.4.3 Algorithmic trading and price discovery -- 1.4.4 Welfare effects -- 1.4.5 Algorithmic trading as a source of risk -- 1.5 Empirical evidence -- 1.5.1 Algorithmic trading and market liquidity -- 1.5.2 Algorithmic trading and volatility -- 1.5.3 Algorithmic trading and price discovery -- 1.5.4 Algorithmic trading and market stability -- 1.6 Conclusions -- Appendix -- Acknowledgment -- References -- 2 Order Choice and Information in Limit Order Markets -- 2.1 Introduction -- 2.2 Order choice with symmetric information -- 2.3 Order choice with asymmetric information -- 2.4 The information content of orders -- 2.5 Questions for future research -- References -- PART II HIGH FREQUENCY DATA MODELING -- 3 Some Recent Results on High Frequency Correlation -- 3.1 Introduction -- 3.2 Data description -- 3.3 Multivariate event time -- 3.3.1 Univariate case -- 3.3.2 Multivariate case -- 3.3.3 Empirical results -- 3.4 High frequency lead/lag -- 3.4.1 The Hayashi-Yoshida cross-correlation function -- 3.4.2 Empirical results -- 3.5 Intraday seasonality of correlation -- 3.5.1 Empirical results -- 3.6 Conclusion -- Acknowledgment -- References -- 4 Statistical Inference for Volatility and Related Limit Theorems -- 4.1 Introduction -- 4.2 QLA for an ergodic diffusion process -- 4.3 QLA for volatility in the finite time-horizon.

4.4 Nonsynchronous covariance estimation -- 4.4.1 Consistent estimator -- 4.4.2 Functional limit theorem -- 4.4.3 Application of YUIMA -- 4.4.4 Lead-lag estimation -- 4.5 YUIMA II for statistical analysis and simulation for stochastic differential equations -- 4.6 Higher order asymptotics and finance -- 4.6.1 Martingale expansion -- 4.6.2 Small σ expansion -- Acknowledgments -- References -- PART III MARKET IMPACT -- 5 Models for the Impact of All Order Book Events -- 5.1 Introduction -- 5.2 A short summary of market order impact models -- 5.3 Many-event impact models -- 5.3.1 Notation and definitions -- 5.3.2 The transient impact model (TIM) -- 5.3.3 The history dependent impact model (HDIM) -- 5.4 Model calibration and empirical tests -- 5.4.1 Data -- 5.4.2 The case of large ticks -- 5.4.3 The case of small ticks -- 5.5 Conclusion -- Appendix -- Acknowledgments -- References -- 6 Limit Order Flow, Market Impact, and Optimal Order Sizes: Evidence from NASDAQ TotalView-ITCH Data -- 6.1 Introduction -- 6.2 Market environment and data -- 6.3 Major order flow and order book characteristics -- 6.4 An econometric model for the market impact of limit orders -- 6.4.1 A cointegrated VAR model for the limit order book -- 6.4.2 Estimating market impact -- 6.5 Market impact at NASDAQ -- 6.6 Optimal order size -- 6.7 Conclusions -- Acknowledgment -- References -- PART IV OPTIMAL TRADING -- Introduction: Trading and Market Micro-structure -- References -- 7 Collective Portfolio Optimization in Brokerage Data: The Role of Transaction Cost Structure -- 7.1 Introduction -- 7.2 Description of the data -- 7.3 Results -- 7.4 The influence of transaction costs on trading behavior from optimal mean-variance portfolios -- 7.5 Discussion and outlook -- Acknowledgments -- References -- 8 Optimal Execution of Portfolio Transactions with Short-Term Alpha -- 8.1 Introduction.

8.2 Short-term alpha decay and hidden order arbitrage theory -- 8.3 Total cost definition and constraints -- 8.3.1 Equations without the risk term -- 8.3.2 Equations including risk without the alpha term -- 8.4 Total cost optimization -- 8.4.1 Results for λ = 0 and the arbitrary alpha term -- 8.4.2 Risk-adjusted optimization -- 8.5 Conclusions -- 8.5.1 Main results in the absence of short-term alpha -- 8.5.2 Main results with short-term alpha -- 8.5.3 Institutional trading practices -- Proviso -- References -- Combined References -- Index.