Readings and resources

Read first

1. Hasbrouck, Empirical Market Microstructure (OUP, 2007): Ch. 3 (the Roll model), Ch. 5 (sequential trade models), Ch. 7 (strategic trade models). Short, rigorous, written for exactly this reader.
2. Almgren and Chriss, "Optimal execution of portfolio transactions", Journal of Risk 3(2), 2000, 5–39 (widely available as an author preprint; search the title).
3. SEBI intraday study, PR 13/2024 (24 Jul 2024): https://www.sebi.gov.in/media-and-notifications/press-releases/jul-2024/sebi-study-finds-that-7-out-of-10-individual-intraday-traders-in-equity-cash-segment-make-losses_84948.html

Papers (in the order of the notes)

• R. Roll, "A simple implicit measure of the effective bid-ask spread in an efficient market", Journal of Finance 39(4), 1984, 1127–1139.
• L. Glosten and P. Milgrom, "Bid, ask and transaction prices in a specialist market with heterogeneously informed traders", Journal of Financial Economics 14(1), 1985, 71–100.
• A. S. Kyle, "Continuous auctions and insider trading", Econometrica 53(6), 1985, 1315–1335.
• A. Admati and P. Pfleiderer, "A theory of intraday patterns: volume and price variability", Review of Financial Studies 1(1), 1988, 3–40.
• R. Almgren, C. Thum, E. Hauptmann and H. Li, "Direct estimation of equity market impact", Risk, July 2005.
• B. Tóth et al., "Anomalous price impact and the critical nature of liquidity in financial markets", Physical Review X 1, 021006 (2011). https://journals.aps.org/prx/abstract/10.1103/PhysRevX.1.021006
• J. Gatheral, "No-dynamic-arbitrage and market impact", Quantitative Finance 10(7), 2010, 749–759.
• A. Perold, "The implementation shortfall: paper versus reality", Journal of Portfolio Management 14(3), 1988, 4–9.
• S. Berkowitz, D. Logue and E. Noser, "The total cost of transactions on the NYSE", Journal of Finance 43(1), 1988, 97–112.
• L. Gao, Y. Han, S. Z. Li and G. Zhou, "Market intraday momentum", Journal of Financial Economics 129(2), 2018, 394–414. https://econpapers.repec.org/RePEc:eee:jfinec:v:129:y:2018:i:2:p:394-414
• C. Zarattini, A. Barbon and A. Aziz, "A profitable day trading strategy for the U.S. equity market", SFI RP 24-98 (2024), https://ideas.repec.org/p/chf/rpseri/rp2498.html; and "Beat the market: an effective intraday momentum strategy for S&P500 ETF (SPY)", SFI RP 24-97, https://www.sfi.ch/de/publications/n-24-97-beat-the-market-an-effective-intraday-momentum-strategy-for-s-p500-etf-spy
• B. Barber, Y.-T. Lee, Y.-J. Liu and T. Odean, "The cross-section of speculator skill: evidence from day trading", Journal of Financial Markets 18, 2014, 1–24. https://ideas.repec.org/a/eee/finmar/v18y2014icp1-24.html
• B. Barber, Y.-T. Lee, Y.-J. Liu, T. Odean and K. Zhang, "Learning, fast or slow", Review of Asset Pricing Studies 10(1), 2020, 61–93.
• F. Chague, R. De-Losso and B. Giovannetti, "Day trading for a living?", working paper 2019, SSRN 3423101; https://econpapers.repec.org/RePEc:fgv:eesptd:525
• B. Barber and T. Odean, "Trading is hazardous to your wealth", Journal of Finance 55(2), 2000, 773–806.

For depth

• Bouchaud, Bonart, Donier and Gould, Trades, Quotes and Prices: Financial Markets Under the Microscope (CUP, 2018): the chapters on metaorder impact and the square-root law.
• Cartea, Jaimungal and Penalva, Algorithmic and High-Frequency Trading (CUP, 2015): the optimal-execution chapters, which extend Almgren–Chriss with stochastic control.
• O'Hara, Market Microstructure Theory (Blackwell, 1995), Ch. 3–4 (information-based models).
• Harris, Trading and Exchanges (OUP, 2003), the chapters on informed traders, liquidity and transaction-cost measurement.

Indian sources Order types and the order window: M00 · 0.2 and M01 · 1.4; trading psychology: M14. SEBI study PDFs and circulars: https://www.sebi.gov.in/ . NSE pre-open and market-timing pages: https://www.nseindia.com/

Companion material Hasbrouck's book page, with Mathematica notebooks for each chapter (including the Roll, sequential-trade and Kyle models): https://pages.stern.nyu.edu/~jhasbrou/EMM%20Book/ . MIT 18.S096 (2013) video lectures for the statistics background (time series, regression): https://ocw.mit.edu/courses/18-s096-topics-in-mathematics-with-applications-in-finance-fall-2013/video_galleries/video-lectures/ . No microstructure lecture video was verified for this module.