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Trading activity and liquidity supply in a pure limit order book market: An empirical analysis using a multivariate count data model

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Author Info
Grammig, Joachin
Heinen, Andreas
Rengifo, Erick

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Abstract

In this paper we perform an empirical analysis of the trading process in a pure limit order book market, the Xetra system which operates at various European exchanges.We study how liquidity supply and demand as well as price volatility affect future trading activity and market resiliency, and discuss the results in the light of predictions implied by theoretical models of financial market microstructure. Parameter estimation and hypotheses testing is conducted using a new econometric methodology designed for the analysis of multivariate count processes.

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File URL: http://mpra.ub.uni-muenchen.de/8115/
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 8115.

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Date of creation: Aug 2004
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Handle: RePEc:pra:mprapa:8115

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Related research
Keywords: Market microstructure Liquidity Trading activity Multivariate count process.

Find related papers by JEL classification:
C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models
G1 - Financial Economics - - General Financial Markets
C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models

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  1. Bae, Kee-Hong & Jang, Hasung & Park, Kyung Suh, 2003. "Traders' choice between limit and market orders: evidence from NYSE stocks," Journal of Financial Markets, Elsevier, vol. 6(4), pages 517-538, August. [Downloadable!] (restricted)
  2. Helena, BELTRAN & Pierre, GIOT & Joachim, GRAMMIG, 2005. "Commonalities in the order book," Université catholique de Louvain, Département des Sciences Economiques Working Paper 2005014, Université catholique de Louvain, Département des Sciences Economiques. [Downloadable!]
  3. 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. [Downloadable!] (restricted)
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This page was last updated on 2008-11-18.

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