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What pieces of limit order book information are informative ?

  • PASCUAL, Roberto
  • VEREDAS, David

This paper studies the importance of different pieces of limit order book information in characterizing order aggressiveness and the timing of trades, order submissions and cancellations. Using limit order book information on a representative sample of Spanish stocks, we evidence that most of the explanatory power of the book concentrates on the best quotes. However, the book beyond the best quotes also matters in explaining the aggressiveness of traders. In particular, liquidity providers (limit-order traders) benefit more from an increased degree of pre-trade transparency than liquidity consumers (market-order traders). Finally, no piece of book information matters in explaining the timing of orders.

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File URL: http://alfresco.uclouvain.be/alfresco/download/attach/workspace/SpacesStore/ab99590f-fd80-43ff-896a-c8e0372b3f1c/coredp_2004_33.pdf
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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2004033.

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Date of creation: 00 Jun 2004
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Handle: RePEc:cor:louvco:2004033
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  1. 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.
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  8. Ranaldo, Angelo, 2004. "Order aggressiveness in limit order book markets," Journal of Financial Markets, Elsevier, vol. 7(1), pages 53-74, January.
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  26. Ron Kaniel & Hong Liu, 2006. "So What Orders Do Informed Traders Use?," The Journal of Business, University of Chicago Press, vol. 79(4), pages 1867-1914, July.
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