What pieces of limit order book information are informative ?
AbstractThis 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 InfoPaper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2004033.
Date of creation: 00 Jun 2004
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open limit order book; order aggressiveness; durations; pre-trade transparency; order driven markets;
Find related papers by JEL classification:
- C41 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Duration Analysis; Optimal Timing Strategies
- C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
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