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Commonalities in the order book

  • Héléna Beltran-Lopez

    ()

  • Pierre Giot

    ()

  • Joachim Grammig

    ()

Recent contributions to microstructure theory hint a commonalities in the price-depth pairs which constitute the open limit order book. In this paper we provide empirical evidence that indeed a small number of latent factors, two for each side of the book, capture most of the variation the price-depth pairs. The results also indicate that a heterogeneous trader population is active on the buy and sell sides. The respective latent factors explaining the by and sell side variation exhibit specific dynamics. When we exploit results from microstructure theory to empirically assess whether the majority of the book variation is due to either informational effects or non-informational fluctuations of liquidity we obtain mixed results.

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File URL: http://hdl.handle.net/10.1007/s11408-009-0109-y
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Article provided by Springer in its journal Financial Markets and Portfolio Management.

Volume (Year): 23 (2009)
Issue (Month): 3 (September)
Pages: 209-242

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Handle: RePEc:kap:fmktpm:v:23:y:2009:i:3:p:209-242
Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=119763

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