Before revision:  We show how all observables (prices , returns, and liquidity measures) are governed by the same variables which also drive arrival and cancellation rates. The sensitivity of our model is evaluated in a simulation study and an empirical analysis.
After revision:  It is based on an operator algebra for individual orders and describes their effect on the LOB. The model inputs are arrival and cancellation rate distributions that emerge from individual behavior of traders, and we show how prices and liquidity arise from the LOB dynamics. In a simulation study and an empirical analysis.