Costly Oak Markets
PhD Research in Financial Market Learning and Price Discovery: Macro Theory and Market Microstructure Theory
Live Trading Results
5 Years of Experience in Live Markets - Applying ideas on pockets of inefficient price delivery
Market Ideas
The Efficient Market Hypothesis (EMH), dominant since the 1960s, holds that asset prices fully reflect available information, leaving little scope for systematic edge. Yet this view largely abstracts from how prices are actually delivered in modern markets.In practice, price discovery is not instantaneous or frictionless. Markets often leave behind “signatures” — recurring patterns where price accelerates, overshoots, and then returns to re-test specific levels before continuing. These signatures may reflect information being incorporated into prices, but they also reveal the mechanics of the price delivery process: liquidity gaps, order-matching rules, and algorithmic feedback loops.What emerges is a picture where markets may be informationally efficient in the EMH sense, yet structurally inefficient in the short run. The delivery of prices can be uneven, creating temporary inefficiencies that repeat with surprising regularity. These dynamics blur the line between EMH and microstructure, suggesting that efficiency is not a static state but a process — one in which short-term rebounds into “unfinished” price pockets are an essential part of how markets reach equilibrium.
EMH has dominated for 60+ years
Explains information efficiency, but not how prices are delivered
Repeated signatures show efficiency is a process, not an instant fact
Structural frictions can create daily, observable inefficiencies
Contact and CV
Theories
This project re-examines high-frequency identification of monetary policy shocks. Standard designs rely on fixed event windows around announcements to isolate the “surprise” component, but they implicitly assume the market’s adjustment completes within that preset clock. In practice, execution frictions and liquidity conditions can stage the response, so a fixed window can capture only part of the move or pick up unrelated noise, distorting the measured shock.I propose a liquidity-aware dynamic event window that adapts to market conditions in real time. Operationally, the window closes when bid–ask spreads and depth normalise towards pre-event baselines and when the initial impulse region is revisited—signals that the mechanical delivery of prices has largely run its course. A simple Time-to-Delivery (TTD) metric captures how long this takes, ensuring the identification reflects both the informational move and the short-run delivery phase.By aligning the window to observable market mechanics, the resulting shock series is cleaner and more comparable across regimes, improving downstream impulse responses and transmission estimates in rates, equities and FX. The framework is deliberately practical—implementable with standard L1 microstructure data—and readily extends to other macro shocks (e.g., oil and carbon), where the relevant window may range from seconds to hours depending on liquidity and uncertainty conditions.Selected references: Gürkaynak, Sack & Swanson (2005); Jarociński & Karadi (2020); Miranda-Agrippino & Ricco (2021); Veronesi (2002).
My Projects
Costly Oak Markets All Rights Reserved
Aidan Yates
PhD Student
Proprietary and Live Futures Trader
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• FCA Conduct of Business Sourcebook (COBS)
https://www.handbook.fca.org.uk/handbook/COBS/
• FCA Finalised Guidance FG15/1 (Past Performance)
https://www.fca.org.uk/publications/finalised-guidance/fg15-01
• FCA Policy Statement PS22/10 (Suitability Guidance)
https://www.fca.org.uk/publications/policy-statements/ps22-10
• CFTC Regulation 4.41 (Hypothetical Performance Disclosures)
https://www.ecfr.gov/current/title-17/chapter-I/part-4/subpart-B/section-4.41
• NFA Compliance Rule 2-29 (Hypothetical Performance Disclosure)
https://www.nfa.futures.org/rulebook/rule2-29.html
Returning back to Inefficient Pockets
OverviewThis study investigates the behaviour of inefficiency pockets in intraday price data small, short-lived microstructure gaps created during rapid one-sided price movements. These structures resemble what some trading theorists informally reference as “untraded voids”, “inefficiencies”, or “price delivery gaps”. The aim of this empirical exercise is not to prove a trading edge, but to examine whether such structures tend to be revisited within a measurable time horizon when observed through a formal, reproducible rule set.Instrument: NASDAQ futures (continuous contract, one-minute bars)Period: Full 2024 Year
InterpretationThe results display two clear characteristics:Inefficiency pockets form frequently, suggesting they are a regular part of the intraday price formation process rather than a rare anomaly.The vast majority are revisited relatively quickly, with a median closure of only two bars and more than 82% resolving within ten bars.These findings appear difficult to reconcile with a naïve random-walk or memoryless price-path assumption, as such a process would not be expected to display strong, fast, and highly consistent return behaviour to microstructure-defined zones. The high closure rates across both bullish and bearish conditions also suggest symmetry in underlying mechanism rather than directional bias.While this study does not assert causation, predictability, or tradability, it does raise legitimate structural questions regarding how price delivery, order flow imbalance, and information absorption may interact within short-horizon market microstructure.
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