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What pieces of limit order book information are informative ?

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  • PASCUAL, Roberto
  • VEREDAS, David

Abstract

This paper studies the importance of different pieces of limit order book information in characterizing order aggressiveness and the timing of trades, order submissions and cancellations. Using limit order book information on a representative sample of Spanish stocks, we evidence that most of the explanatory power of the book concentrates on the best quotes. However, the book beyond the best quotes also matters in explaining the aggressiveness of traders. In particular, liquidity providers (limit-order traders) benefit more from an increased degree of pre-trade transparency than liquidity consumers (market-order traders). Finally, no piece of book information matters in explaining the timing of orders.

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Bibliographic Info

Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2004033.

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Date of creation: 00 Jun 2004
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Handle: RePEc:cor:louvco:2004033

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Related research

Keywords: open limit order book; order aggressiveness; durations; pre-trade transparency; order driven markets;

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References

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  1. Madhavan, Ananth & Panchapagesan, Venkatesh, 2000. "Price Discovery in Auction Markets: A Look Inside the Black Box," Review of Financial Studies, Society for Financial Studies, vol. 13(3), pages 627-58.
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  4. repec:wop:humbsf:1999-50 is not listed on IDEAS
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Citations

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Cited by:
  1. Brunel, Alexandre, 2011. "Impact des rachats d’actions sur la liquidité et la rentabilité des actions," Economics Thesis from University Paris Dauphine, Paris Dauphine University, number 123456789/6404 edited by Hamon, Jacques.
  2. Wuyts, Gunther, 2008. "The impact of liquidity shocks through the limit order book," CFS Working Paper Series 2008/53, Center for Financial Studies (CFS).
  3. Roberto Pascual & David Veredas, 2010. "Does the open limit order book matter in explaining long run volatility?," ULB Institutional Repository 2013/136192, ULB -- Universite Libre de Bruxelles.
  4. Anthony Hall & Nikolaus Hautsch, 2006. "Order aggressiveness and order book dynamics," Empirical Economics, Springer, vol. 30(4), pages 973-1005, January.
  5. GRAMMIG, Joachim & HEINEN, Andréas & RENGIFO, Erick, 2004. "Trading activity and liquidity supply in a pure limit order book market," CORE Discussion Papers 2004058, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  6. Sperl, Miriam, 2008. "Quantifying the efficiency of the Xetra LOB market: Detailed recipe," CFS Working Paper Series 2008/21, Center for Financial Studies (CFS).
  7. Charles Cao & Oliver Hansch & Xiaoxin Wang, 2008. "Order Placement Strategies In A Pure Limit Order Book Market," Journal of Financial Research, Southern Finance Association & Southwestern Finance Association, vol. 31(2), pages 113-140.
  8. Katarzyna Bień-Barkowska, 2011. "Multistate asymmetric ACD model: an application to order dynamics in the EUR/PLN spot market," National Bank of Poland Working Papers 104, National Bank of Poland, Economic Institute.
  9. David Abad & José Yagüe & Sonia Sanabria, 2005. "Liquidity And Information Around Annual Earnings Announcements: An Intraday Analysis Of The Spanish Stock Market," Working Papers. Serie EC 2005-16, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  10. 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.

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