Abstract
We study discrete price changes due to the size of a trade in the market microstructure model. We use a mixture of Poisson distributions to model the discrete changes in stock price. The parameters are estimated using the Expectation-Maximization (EM) algorithm with mixing probabilities which depend on order size. Consistency and asymptotic normality of a sequence of estimators are proved, and asymptotic confidence intervals for functions of the parameters are derived. We test the method with simulated and real data.
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Jayasekare, R.R., Gill, R. & Lee, K. Modeling discrete stock price changes using a mixture of Poisson distributions. J. Korean Stat. Soc. 45, 409–421 (2016). https://doi.org/10.1016/j.jkss.2016.01.002
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DOI: https://doi.org/10.1016/j.jkss.2016.01.002