Equity Valuation and Portfolio Management

WHAT IS HIGH-FREQUENCY DATA?

High-frequency data, also known as “tick data,” is a record of live market activity. Every time a customer, a dealer, or another entity posts a so-called limit order to buy s units of a specific security with ticker X at price q, a bid quote is logged at time t_b to buy units of X. (Market orders are incorporated into tick data in a different way as discussed below.) When the newly arrived bid quote has the highest price relative to all other previously arrived bid quotes in force, becomes known as “the best bid” available at time t_b. Similarly, when a trading entity posts a limit order to sell s units of X at price q, an ask quote is logged at time t_a to sell units of X. If the latest is lower than all other available ask quotes for security X, becomes known ...