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Liquidity distribution in the limit order book on the stock exchange of Thailand

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  • Visaltanachoti, Nuttawat
  • Charoenwong, Charlie
  • Ding, David K.

Abstract

The liquidity distribution, or the shape of the limit order book, influences trading behavior and choice of order submission by public liquidity suppliers. The present study seeks to discover whether liquidity providers are concerned about being picked off by informed traders, and whether they are less willing to supply liquidity at the market or demand higher price spreads. The results show that liquidity at the market is a small portion of total liquidity, and that firm size, minimum tick size, volatility, and trading volume play significant roles in determining the liquidity distribution within an order book.

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Bibliographic Info

Article provided by Elsevier in its journal International Review of Financial Analysis.

Volume (Year): 17 (2008)
Issue (Month): 2 ()
Pages: 291-311

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Handle: RePEc:eee:finana:v:17:y:2008:i:2:p:291-311

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Web page: http://www.elsevier.com/locate/inca/620166

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  1. Angel, James J, 1997. " Tick Size, Share Prices, and Stock Splits," Journal of Finance, American Finance Association, vol. 52(2), pages 655-81, June.
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  5. Amihud, Yakov, 2002. "Illiquidity and stock returns: cross-section and time-series effects," Journal of Financial Markets, Elsevier, vol. 5(1), pages 31-56, January.
  6. Bondarenko, Oleg & Sung, Jaeyoung, 2003. "Specialist participation and limit orders," Journal of Financial Markets, Elsevier, vol. 6(4), pages 539-571, August.
  7. Niemeyer, Jonas & Sandås, Patrik, 1995. "An Empirical Analysis of the Trading Structure at the Stockholm Stock Exchange," Working Paper Series in Economics and Finance 44, Stockholm School of Economics.
  8. Harris, Lawrence, 1991. "Stock Price Clustering and Discreteness," Review of Financial Studies, Society for Financial Studies, vol. 4(3), pages 389-415.
  9. 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.
  10. Al-Suhaibani, Mohammad & Kryzanowski, Lawrence, 2000. "An exploratory analysis of the order book, and order flow and execution on the Saudi stock market," Journal of Banking & Finance, Elsevier, vol. 24(8), pages 1323-1357, August.
  11. Lee, Charles M C & Mucklow, Belinda & Ready, Mark J, 1993. "Spreads, Depths, and the Impact of Earnings Information: An Intraday Analysis," Review of Financial Studies, Society for Financial Studies, vol. 6(2), pages 345-74.
  12. Harris, Lawrence E, 1994. "Minimum Price Variations, Discrete Bid-Ask Spreads, and Quotation Sizes," Review of Financial Studies, Society for Financial Studies, vol. 7(1), pages 149-78.
  13. McInish, Thomas H & Wood, Robert A, 1992. " An Analysis of Intraday Patterns in Bid/Ask Spreads for NYSE Stocks," Journal of Finance, American Finance Association, vol. 47(2), pages 753-64, June.
  14. Parlour, Christine A, 1998. "Price Dynamics in Limit Order Markets," Review of Financial Studies, Society for Financial Studies, vol. 11(4), pages 789-816.
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