Information loss and bias in likert survey responses.

Likert response surveys are widely applied in marketing, public opinion polls, epidemiological and economic disciplines. Theoretically, Likert mapping from real-world beliefs could lose significant amounts of information, as they are discrete categorical metrics. Similarly, the subjective nature of Likert-scale data capture, through questionnaires, holds the potential to inject researcher biases into the statistical analysis. Arguments and counterexamples are provided to show how this loss and bias can potentially be substantial under extreme polarization or strong beliefs held by the surveyed population, and where the survey instruments are poorly controlled. These theoretical possibilities were tested using a large survey with 14 Likert-scaled questions presented to 125,387 respondents in 442 distinct behavioral-demographic groups. Despite the potential for bias and information loss, the empirical analysis found strong support for an assumption of minimal information loss under Normal beliefs in Likert scaled surveys. Evidence from this study found that the Normal assumption is a very good fit to the majority of actual responses, the only variance from Normal being slightly platykurtic (kurtosis ~ 2) which is likely due to censoring of beliefs after the lower and upper extremes of the Likert mapping. The discussion and conclusions argue that further revisions to survey protocols can assure that information loss and bias in Likert-scaled data are minimal.

Trade informativeness and liquidity in Bitcoin markets.

Liquid markets are driven by information asymmetries and the injection of new information in trades into market prices. Where market matching uses an electronic limit order book (LOB), limit orders traders may make suboptimal price and trade decisions based on new but incomplete information arriving with market orders. This paper measures the information asymmetries in Bitcoin trading limit order books on the Kraken platform, and compares these to prior studies on equities LOB markets. In limit order book markets, traders have the option of waiting to supply liquidity through limit orders, or immediately demanding liquidity through market orders or aggressively priced limit orders. In my multivariate analysis, I control for volatility, trading volume, trading intensity and order imbalance to isolate the effect of trade informativeness on book liquidity. The current research offers the first empirical study of Glosten (1994) to yield a positive, and credibly large transaction cost parameter. Trade and LOB datasets in this study were several orders of magnitude larger than any of the prior studies. Given the poor small sample properties of GMM, it is likely that this substantial increase in size of datasets is essential for validating the model. The research strongly supports Glosten's seminal theoretical model of limit order book markets, showing that these are valid models of Bitcoin markets. This research empirically tested and confirmed trade informativeness as a prime driver of market liquidity in the Bitcoin market.