The limit order book on different time scales

TL;DR

This paper investigates how the microstructure of financial markets, as seen in the limit order book data from the LSE, transitions from short-term fluctuations to long-term systematic behavior across different time scales.

Contribution

It provides a comparative analysis of market microstructure and global behavior on various time scales using empirical LSE data.

Findings

Microstructure dominates at short time scales.

Global systematic behavior emerges at longer time scales.

Crossover point identified between microstructure and global behavior.

Abstract

Financial markets can be described on several time scales. We use data from the limit order book of the London Stock Exchange (LSE) to compare how the fluctuation dominated microstructure crosses over to a more systematic global behavior.