Measuring and explaining the asymmetry of liquidity
This paper examines transactions costs in buying versus selling using a large database of snapshots of the limit order book. On the equity spot market, there is clear evidence of asymmetry in liquidity: transactions costs are lower for buy market orders when compared with sell market orders. In the identical setting, trading in single stock futures is also observed, and there is little evidence of asymmetry. This suggests that asymmetry in liquidity may be driven by short sales restrictions which are present on the spot market but not on the single stock futures market.
|Date of creation:||Apr 2012|
|Date of revision:|
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- Potters, Marc & Bouchaud, Jean-Philippe, 2003. "More statistical properties of order books and price impact," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 324(1), pages 133-140.
- David Michayluk & Karyn Neuhauser, 2008. "Is Liquidity Symmetric? A Study of Newly Listed Internet and Technology Stocks," International Review of Finance, International Review of Finance Ltd., vol. 8(3-4), pages 159-178.
- Hedvall, Kaj & Niemeyer, Jonas & Rosenqvist, Gunnar, 1997.
"Do buyers and sellers behave similarly in a limit order book? A high-frequency data examination of the Finnish stock exchange,"
Journal of Empirical Finance,
Elsevier, vol. 4(2-3), pages 279-293, June.
- Hedvall, Kaj & Niemeyer, Jonas & Rosenqvist, Gunnar, 1997. "Do Buyers and Sellers Behave Similarly in a Limit Order Book? A High-Frequency Data Examination of the Finnish Stock Exchange," SSE/EFI Working Paper Series in Economics and Finance 160, Stockholm School of Economics.
- Vasiliki Plerou & Parameswaran Gopikrishnan & Xavier Gabaix & H. Eugene Stanley, 2001. "Quantifying Stock Price Response to Demand Fluctuations," Papers cond-mat/0106657, arXiv.org.
- Keim, Donald B & Madhaven, Ananth, 1996. "The Upstairs Market for Large-Block Transactions: Analysis and Measurement of Price Effects," Review of Financial Studies, Society for Financial Studies, vol. 9(1), pages 1-36.
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