The paper posted above: "Forecasting prices from level-I quotes in the presence of hidden liquidity" is extremely interesting.
However, in order to back calculate the 'hidden liquidity' one would need the bid and the bid size, and the ask and the ask size. I assume one could reconstruct the bid and ask from price based on the assumed spread, but unless I am mistaken one can not reconstruct the bid size and ask size from the balance. Was there a reason to save the calculated balance quantity rather than the more raw bid and ask sizes in the history file? If I wanted to implement some H calculations, would I need a branch of JBT that saved bid size and ask size in the data file? The other thing I found interesting, and probably controversial, is their statement that in markets with a lot of hidden liquidity, the bid and ask sizes (I think that implies the balance) lose their value as a predictor of price movement. They are almost saying that less liquid markets are better to trade than ES :P. Or put in another way, one would calculate H for several instruments, and then trade one with low observable hidden liquidity as it could then be predicted better (strategies would work better). -- You received this message because you are subscribed to the Google Groups "JBookTrader" group. To unsubscribe from this group and stop receiving emails from it, send an email to [email protected]. To post to this group, send email to [email protected]. Visit this group at http://groups.google.com/group/jbooktrader. For more options, visit https://groups.google.com/groups/opt_out.
