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Limit-order submission strategies under asymmetric information

Author

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  • Menkhoff, Lukas
  • Osler, Carol L.
  • Schmeling, Maik

Abstract

This paper provides evidence that informed traders dominate the response of limit-order submissions to shocks in a pure limit-order market. In the market we study, informed traders are highly sensitive to spreads, volatility, momentum and depth. By contrast, uninformed traders are relatively insensitive to all these market conditions. The dominance of the informed over limit-order submissions is magnified by contrasts between them and the uninformed in the use of aggressively-priced limit orders.

Suggested Citation

  • Menkhoff, Lukas & Osler, Carol L. & Schmeling, Maik, 2010. "Limit-order submission strategies under asymmetric information," Journal of Banking & Finance, Elsevier, vol. 34(11), pages 2665-2677, November.
  • Handle: RePEc:eee:jbfina:v:34:y:2010:i:11:p:2665-2677
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    More about this item

    Keywords

    Limit-order market Order submission Informed traders Market conditions;

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General

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