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Do buyers and sellers behave similarly in a limit order book? A high-frequency data examination of the Finnish stock exchange

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  • Hedvall, Kaj
  • Niemeyer, Jonas
  • Rosenqvist, Gunnar

Abstract

The symmetry of an electronic limit order book is studied using high-frequency data. Is the order flow generated by buyers of the same structure as the one by sellers or would factors such as short selling restrictions and information trading result in asymmetries in the order flow? A model expressing symmetry of a limit order book is developed and tested within a log.-linear Poisson regression framework. Although the orderflow was found to be quite symmetric in general, clear asymmetries were identified for various trade categories suggesting differences between the order submission of buyers and sellers using a limit order book.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Empirical Finance.

Volume (Year): 4 (1997)
Issue (Month): 2-3 (June)
Pages: 279-293

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Handle: RePEc:eee:empfin:v:4:y:1997:i:2-3:p:279-293

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References

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  1. Easley, David, et al, 1996. " Liquidity, Information, and Infrequently Traded Stocks," Journal of Finance, American Finance Association, vol. 51(4), pages 1405-36, September.
  2. 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.
  3. Vijh, Anand M, 1990. " Liquidity of the CBOE Equity Options," Journal of Finance, American Finance Association, vol. 45(4), pages 1157-79, September.
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Cited by:
  1. Kovaleva, P. & Iori, G., 2012. "Optimal Trading Strategies in a Limit Order Market with Imperfect Liquidity," Working Papers 12/05, Department of Economics, City University London.
  2. Rajat Tayal & Susan Thomas, 2012. "Measuring and explaining the asymmetry of liquidity," Indira Gandhi Institute of Development Research, Mumbai Working Papers 2012-011, Indira Gandhi Institute of Development Research, Mumbai, India.
  3. Brown, Philip & Thomson, Nathanial & Walsh, David, 1999. "Characteristics of the order flow through an electronic open limit order book," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 9(4), pages 335-357, November.
  4. Timotheos Angelidis & Alexandros Benos, . "The Components of the Bid-Ask Spread: The case of the Athens Stock Exchange," Working Papers 0615, University of Crete, Department of Economics.
  5. Hall, Anthony D. & Hautsch, Nikolaus, 2007. "Modelling the buy and sell intensity in a limit order book market," Journal of Financial Markets, Elsevier, vol. 10(3), pages 249-286, August.
  6. Ahn, Hee-Joon & Cheung, Yan-Leung, 1999. "The intraday patterns of the spread and depth in a market without market makers: The Stock Exchange of Hong Kong," Pacific-Basin Finance Journal, Elsevier, vol. 7(5), pages 539-556, December.
  7. Adam Blazejewski & Richard Coggins, 2004. "A piecewise linear model for trade sign inference," Finance 0412012, EconWPA.
  8. Vo, Minh T., 2007. "Limit orders and the intraday behavior of market liquidity: Evidence from the Toronto stock exchange," Global Finance Journal, Elsevier, vol. 17(3), pages 379-396, 03.
  9. Rösch, Christoph G. & Kaserer, Christoph, 2013. "Market liquidity in the financial crisis: The role of liquidity commonality and flight-to-quality," Journal of Banking & Finance, Elsevier, vol. 37(7), pages 2284-2302.
  10. Pham, Thu Phuong & Westerholm, P. Joakim, 2013. "A survey of research into broker identity and limit order book," Working Papers 17212, University of Tasmania, School of Economics and Finance, revised 16 Oct 2013.
  11. Adam Blazejewski & Richard Coggins, 2004. "A local non-parametric model for trade sign inference," Finance 0408009, EconWPA.
  12. Ranaldo, Angelo, 2004. "Order aggressiveness in limit order book markets," Journal of Financial Markets, Elsevier, vol. 7(1), pages 53-74, January.

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