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Price dynamics and market liquidity: An intraday event study on Euronext

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  • Mazza, Paolo

Abstract

In this paper, we determine whether intraday price dynamics observed on Euronext help characterize market liquidity in real time. We generate 15-min price movement configurations based on high-low-open-close (HLOC) patterns and measure liquidity in terms of spread, depth, order imbalance, dispersion and slope. We also consider trading activity and volatility measures. Based on an event study methodology, we find that particular HLOC configurations are associated with higher liquidity in the limit order book. Although these effects are short-lived, market participants could benefit from temporary higher liquidity by executing their trades when these price configurations occur.

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  • Mazza, Paolo, 2015. "Price dynamics and market liquidity: An intraday event study on Euronext," The Quarterly Review of Economics and Finance, Elsevier, vol. 56(C), pages 139-153.
  • Handle: RePEc:eee:quaeco:v:56:y:2015:i:c:p:139-153
    DOI: 10.1016/j.qref.2014.09.003
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    More about this item

    Keywords

    Liquidity; Limit order market; Informed trading; Market microstructure; HLOC dynamics;

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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