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Limit-Order Submission Strategies under Asymmetric Information

  • Lukas Menkhoff
  • Carol L. Osler
  • Maik Schmeling

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.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2010/wp-cesifo-2010-05/cesifo1_wp3054.pdf
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3054.

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Date of creation: 2010
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Handle: RePEc:ces:ceswps:_3054
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