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Order aggressiveness and the diagonal effect in experimental double auction markets

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  • Majois, Christophe
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    Abstract

    This paper analyzes the behavior of players in experimental double auction markets. We show that the "diagonal effect", a well-known phenomenon observed in real markets, also shows up in experimental markets and is mainly due to order splitting.

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    File URL: http://www.sciencedirect.com/science/article/B6V84-4YHNYRY-3/2/91dc6498755117c1e1669ab9a5bdabdb
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    Bibliographic Info

    Article provided by Elsevier in its journal Economics Letters.

    Volume (Year): 107 (2010)
    Issue (Month): 2 (May)
    Pages: 304-309

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    Handle: RePEc:eee:ecolet:v:107:y:2010:i:2:p:304-309

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    Web page: http://www.elsevier.com/locate/ecolet

    Related research

    Keywords: Diagonal effect Experimental markets Traders' behavior Order splitting;

    References

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    1. Urs Fischbacher, 2007. "z-Tree: Zurich toolbox for ready-made economic experiments," Experimental Economics, Springer, vol. 10(2), pages 171-178, June.
    2. Schnitzlein, Charles R, 1996. " Call and Continuous Trading Mechanisms under Asymmetric Information: An Experimental Investigation," Journal of Finance, American Finance Association, vol. 51(2), pages 613-36, June.
    3. Ron Kaniel & Hong Liu, 2006. "So What Orders Do Informed Traders Use?," The Journal of Business, University of Chicago Press, vol. 79(4), pages 1867-1914, July.
    4. Parlour, Christine A, 1998. "Price Dynamics in Limit Order Markets," Review of Financial Studies, Society for Financial Studies, vol. 11(4), pages 789-816.
    5. Flood, M. & Huisman , R. & Koedijk, C.G. & Mahieu, R.J., 1999. "Quote disclosure and price discovery in multiple-dealer financial markets," Open Access publications from Tilburg University urn:nbn:nl:ui:12-3106474, Tilburg University.
    6. Biais, Bruno & Hillion, Pierre & Spatt, Chester, 1995. " An Empirical Analysis of the Limit Order Book and the Order Flow in the Paris Bourse," Journal of Finance, American Finance Association, vol. 50(5), pages 1655-89, December.
    7. Ranaldo, Angelo, 2004. "Order aggressiveness in limit order book markets," Journal of Financial Markets, Elsevier, vol. 7(1), pages 53-74, January.
    8. Friedman, Daniel, 1993. "How Trading Institutions Affect Financial Market Performance: Some Laboratory Evidence," Economic Inquiry, Western Economic Association International, vol. 31(3), pages 410-35, July.
    9. Bloomfield, Robert & O'Hara, Maureen, 1999. "Market Transparency: Who Wins and Who Loses?," Review of Financial Studies, Society for Financial Studies, vol. 12(1), pages 5-35.
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