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Author : Gunther Wuyts
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (92 download)
Download or read book The Impact of Hidden Liquidity in Limit Order Books written by Gunther Wuyts and published by . This book was released on 2008 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Gunther Wuyts
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (92 download)
Download or read book The Impact of Hidden Liquidity in Limit Order Books written by Gunther Wuyts and published by . This book was released on 2008 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : John Ritter
Publisher :
ISBN 13 :
Total Pages : 329 pages
Book Rating : 4.:/5 (15 download)
Download or read book Essays on Hidden Liquidity in Limit Order Markets written by John Ritter and published by . This book was released on 2016 with total page 329 pages. Available in PDF, EPUB and Kindle. Book excerpt: "This dissertation consists of three chapters that examine the use of hidden liquidity in limit order markets. Chapter 1 models a dynamic limit order market to study how the ability to hide a limit order affects market quality and traders' behavior. In the model, traders vary in the speed with which they can adjust their limit orders (Fast and Slow traders) and in the information they possess about the fundamental value of the asset (Informed and Uninformed traders). The model predicts that Fast traders are more likely to conceal their limit orders than Slow traders, since they can adjust their hidden orders quicker if they lose priority to displayed orders. Hidden orders in the limit order book make it more difficult for Uninformed traders to infer the fundamental value of the asset, which causes Informed traders to conceal their limit orders more than Uninformed traders. The model also predicts that there is not a significant difference in market quality between a transparent market that only allows displayed orders and an opaque market that allows traders the option to conceal their limit orders. Surprisingly, the profits of Informed traders are lower in an opaque market, because Uninformed traders can better infer the fundamental value of the asset due to Informed traders increasing the aggressiveness of their displayed limit orders. Chapter 2 examines how the speed of market participants affects the decision to conceal a limit order. In terms of the order initiator, I find that traders with a speed advantage, high-frequency traders (HFTs), are more likely to hide an order in the limit order book, but slower traders, non-high frequency traders (NHFTs), are more likely to hide an order when supplying liquidity in a trade. This difference occurs because NHFTs are more likely to conceal their aggressively priced limit orders, which reduces their adverse selection costs. Hiding a limit order does not reduce the adverse selection faced by HFTs, who are more likely to conceal their less aggressively priced limit orders. In terms of other market participants, I find that the limit orders of both HFTs and NHFTs are less likely to be concealed as the proportion of trading volume in which HFTs participate increases. Overall, these findings suggest that the speed of both the order initiator and other market participants affect a trader's decision to conceal their limit order. Chapter 3 investigates if informed liquidity suppliers display or hide their limit orders. I find that imbalances in hidden liquidity in the limit order book predict returns at both the intraday and daily levels, while imbalances in displayed liquidity do not. This relationship remains robust after controlling for liquidity, order flow, and past returns. I examine hidden imbalances around earnings announcements and find that long-short portfolios based on the average hidden imbalance during the two days prior to the earnings announcement earn the greatest returns for announcements with the largest earnings surprise. I also examine hidden liquidity supplied by highfrequency traders (HFTs) and non-high frequency traders (NHFTs) and find that imbalances in the hidden liquidity supplied by NHFTs predict returns at the intraday level, while imbalances in the hidden liquidity supplied by HFTs do not. These results are consistent with the hypothesis that informed NHFTs, who possess longlived information compared to HFTs, supply liquidity using hidden orders to prevent information leakage."--Pages iv-v.
Author : Frank de Jong
Publisher : Cambridge University Press
ISBN 13 : 1139478443
Total Pages : 209 pages
Book Rating : 4.1/5 (394 download)
Download or read book The Microstructure of Financial Markets written by Frank de Jong and published by Cambridge University Press. This book was released on 2009-05-14 with total page 209 pages. Available in PDF, EPUB and Kindle. Book excerpt: The analysis of the microstructure of financial markets has been one of the most important areas of research in finance and has allowed scholars and practitioners alike to have a much more sophisticated understanding of the dynamics of price formation in financial markets. Frank de Jong and Barbara Rindi provide an integrated graduate level textbook treatment of the theory and empirics of the subject, starting with a detailed description of the trading systems on stock exchanges and other markets and then turning to economic theory and asset pricing models. Special attention is paid to models explaining transaction costs, with a treatment of the measurement of these costs and the implications for the return on investment. The final chapters review recent developments in the academic literature. End-of-chapter exercises and downloadable data from the book's companion website provide opportunities to revise and apply models developed in the text.
Author : Gökhan Cebiroglu
Publisher :
ISBN 13 :
Total Pages : 25 pages
Book Rating : 4.:/5 (13 download)
Download or read book Determinants and Impact of Hidden Liquidity written by Gökhan Cebiroglu and published by . This book was released on 2013 with total page 25 pages. Available in PDF, EPUB and Kindle. Book excerpt: We take advantage of a unique data set, NASDAQ ModelView, to empirically analyze the determinants and the impact of hidden liquidity on public exchanges. Our findings are as follows. First, the cross-sectional presence of hidden liquidity is well explained by observable and readily available stock characteristics. The spread captures most of the limit order book's predictive power over hidden liquidity. Second, hidden orders arrive in large volumes, at few points in time and cluster around few price quotes. Third, these hidden order submissions have an economically significant impact on price returns. While we do not observe an impact for displayed orders, the impact of hidden orders exceeds the impact of important earnings announcements news. We find evidence that these effects do not arise from information arrival but from trading frictions. Accordingly, hidden orders impair an efficient coordination between the supply and demand side of liquidity. Ultimately, large hidden orders are forced to execute against a "thin" market leading to higher price fluctuations.
Author : Georg Pristas
Publisher : Cuvillier Verlag
ISBN 13 : 386727679X
Total Pages : 163 pages
Book Rating : 4.8/5 (672 download)
Download or read book Limit Order Book Dynamics and Asset Liquidity written by Georg Pristas and published by Cuvillier Verlag. This book was released on 2008 with total page 163 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Author : Frédéric Abergel
Publisher : Cambridge University Press
ISBN 13 : 1316870480
Total Pages : 242 pages
Book Rating : 4.3/5 (168 download)
Download or read book Limit Order Books written by Frédéric Abergel and published by Cambridge University Press. This book was released on 2016-05-09 with total page 242 pages. Available in PDF, EPUB and Kindle. Book excerpt: A limit order book is essentially a file on a computer that contains all orders sent to the market, along with their characteristics such as the sign of the order, price, quantity and a timestamp. The majority of organized electronic markets rely on limit order books to store the list of interests of market participants on their central computer. A limit order book contains all the information available on a specific market and it reflects the way the market moves under the influence of its participants. This book discusses several models of limit order books. It begins by discussing the data to assess their empirical properties, and then moves on to mathematical models in order to reproduce the observed properties. Finally, the book presents a framework for numerical simulations. It also covers important modelling techniques including agent-based modelling, and advanced modelling of limit order books based on Hawkes processes. The book also provides in-depth coverage of simulation techniques and introduces general, flexible, open source library concepts useful to readers studying trading strategies in order-driven markets.
Author : Pongsutti Phuensane
Publisher :
ISBN 13 :
Total Pages : 47 pages
Book Rating : 4.:/5 (13 download)
Download or read book Term-Structure Analysis of Hidden Order in the Limit Order Book written by Pongsutti Phuensane and published by . This book was released on 2016 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: The hidden order is currently increasingly popular as a standard feature of electronic limit order book markets. The invisible order allows traders to hide all, or partially hide their orders to avoid exposure to risk. I propose a new hidden order detection algorithm for the limit order book to investigate the impact of invisible orders on the market environment using E-mini S&P 500 data. The algorithm shows 43% all of the trade volume is involved with invisible liquidity. This work also finds that price impact decreases and market quality is improved with the presence of a hidden order both during high and low-frequency trading periods. I use this measure to study the association between hidden order and other observed market environments. The analysis finds aggressively hidden order activity when trading volume is increased.
Author : Hendrik Bessembinder
Publisher :
ISBN 13 :
Total Pages : 53 pages
Book Rating : 4.:/5 (129 download)
Download or read book Hidden Liquidity written by Hendrik Bessembinder and published by . This book was released on 2009 with total page 53 pages. Available in PDF, EPUB and Kindle. Book excerpt: Many stock exchanges choose to reduce market transparency by allowing traders to hide some or all of their order size. We study costs and benefits of hidden order usage for a sample of Euronext-Paris stocks, where hidden orders represent 44% of sample order volume. All else equal, hidden orders are associated with smaller opportunity costs and lower implementation shortfall costs. However, hidden orders are less likely to execute completely and exhibit longer times to execution. The presence and magnitude of hidden orders can be predicted to a significant but imperfect degree based on observable order attributes, firm characteristics and market conditions. We find that the option to hide order size is used differently by traders who submit passive versus aggressively priced orders. Specifically, aggressively priced orders tend to be exposed, to draw out potential counterparties and allow quick execution, while larger and less aggressively priced orders tend to be hidden, to reduce the option value of standing limit orders. Overall, the results indicate that the option to hide order size is valuable, in particular to patient traders without superior information on future security price movements.
Author : Ángel Pardo Tornero
Publisher :
ISBN 13 :
Total Pages : 26 pages
Book Rating : 4.:/5 (129 download)
Download or read book On the Hidden Side of Liquidity written by Ángel Pardo Tornero and published by . This book was released on 2015 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper deals with the informativeness of iceberg orders, also known as hidden limit orders (HLOs). Namely, we analyze how the market reacts when the presence of hidden volume in the limit order book is revealed by the trading process. We use high frequency book and transaction data from the Spanish Stock Exchange, including a large sample of executed HLOs. We show that just when hidden volume is detected, traders on the opposite side of the market become more aggressive, exploiting the opportunity to consume more than expected at the best quotes. However, neither illiquidity nor volatility increases in the short-term. Furthermore, the detection of hidden volume has no relevant price impact. Overall, our results suggest that market participants do not attribute any relevant informational content to the hidden side of liquidity.
Author : Robert J. Bloomfield
Publisher :
ISBN 13 :
Total Pages : 63 pages
Book Rating : 4.:/5 (13 download)
Download or read book Hidden Liquidity written by Robert J. Bloomfield and published by . This book was released on 2014 with total page 63 pages. Available in PDF, EPUB and Kindle. Book excerpt: We use a laboratory market to investigate how the ability to hide orders affects traders' strategies and market outcomes in a limit order book environment. We find that order strategies are greatly affected by allowing hidden liquidity, with traders substituting non-displayed for displayed shares and changing the aggressiveness of their trading. As traders adapt their behavior to the different opacity regimes, however, most aggregate market outcomes (such as liquidity and informational efficiency) are not affected as much. We also find that opacity appears to increase the profits of informed traders but only when their private information is very valuable.
Author : Bidisha Chakrabarty
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (129 download)
Download or read book Hidden Liquidity written by Bidisha Chakrabarty and published by . This book was released on 2008 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Electronic limit order books are prevalent in financial markets. Most allow quot;hidden orders,quot; in which the order's information is neither revealed to the market nor reflected in the National Best Bid and Offer quotes. Hidden orders comprise a large portion of the trading activity in many stocks. While they enable traders to conceal information, hidden orders lose time priority to displayed orders, and thus face increased risk of non-execution. We examine hidden order activity around earnings announcements, a time when demand for the opacity of hidden orders is likely high, due to heightened private information acquisition, but demand for immediate trade execution is also likely high due to increased trading activity. We find that hidden order volume, the number of hidden orders executed, hidden order trade size, and the full size of hidden orders executed all increase around earnings announcements. This suggests hidden orders provide significant liquidity at a time when quoted liquidity typically falls. We also show that changes in hidden order activity at earnings announcements are related to cross-sectional variation in the firm's pre-announcement information environment, the information conveyed by the earnings announcement, and changes in quoted liquidity.
Author : Ingmar Nolte
Publisher : Routledge
ISBN 13 : 1317570766
Total Pages : 377 pages
Book Rating : 4.3/5 (175 download)
Download or read book High Frequency Trading and Limit Order Book Dynamics written by Ingmar Nolte and published by Routledge. This book was released on 2016-04-14 with total page 377 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book brings together the latest research in the areas of market microstructure and high-frequency finance along with new econometric methods to address critical practical issues in these areas of research. Thirteen chapters, each of which makes a valuable and significant contribution to the existing literature have been brought together, spanning a wide range of topics including information asymmetry and the information content in limit order books, high-frequency return distribution models, multivariate volatility forecasting, analysis of individual trading behaviour, the analysis of liquidity, price discovery across markets, market microstructure models and the information content of order flow. These issues are central both to the rapidly expanding practice of high frequency trading in financial markets and to the further development of the academic literature in this area. The volume will therefore be of immediate interest to practitioners and academics. This book was originally published as a special issue of European Journal of Finance.
Author : Deniz Ozenbas
Publisher : Springer Nature
ISBN 13 : 3030748170
Total Pages : 111 pages
Book Rating : 4.0/5 (37 download)
Download or read book Liquidity, Markets and Trading in Action written by Deniz Ozenbas and published by Springer Nature. This book was released on 2022 with total page 111 pages. Available in PDF, EPUB and Kindle. Book excerpt: This open access book addresses four standard business school subjects: microeconomics, macroeconomics, finance and information systems as they relate to trading, liquidity, and market structure. It provides a detailed examination of the impact of trading costs and other impediments of trading that the authors call rictions It also presents an interactive simulation model of equity market trading, TraderEx, that enables students to implement trading decisions in different market scenarios and structures. Addressing these topics shines a bright light on how a real-world financial market operates, and the simulation provides students with an experiential learning opportunity that is informative and fun. Each of the chapters is designed so that it can be used as a stand-alone module in an existing economics, finance, or information science course. Instructor resources such as discussion questions, Powerpoint slides and TraderEx exercises are available online.
Author : Thierry Foucault
Publisher : Oxford University Press
ISBN 13 : 0197542069
Total Pages : 531 pages
Book Rating : 4.1/5 (975 download)
Download or read book Market Liquidity written by Thierry Foucault and published by Oxford University Press. This book was released on 2023 with total page 531 pages. Available in PDF, EPUB and Kindle. Book excerpt: "The process by which securities are traded is very different from the idealized picture of a frictionless and self-equilibrating market offered by the typical finance textbook. This book offers a more accurate and authoritative take on this process. The book starts from the assumption that not everyone is present at all times simultaneously on the market, and that participants have quite diverse information about the security's fundamentals. As a result, the order flow is a complex mix of information and noise, and a consensus price only emerges gradually over time as the trading process evolves and the participants interpret the actions of other traders. Thus, a security's actual transaction price may deviate from its fundamental value, as it would be assessed by a fully informed set of investors. The book takes these deviations seriously, and explains why and how they emerge in the trading process and are eventually eliminated. The authors draw on a vast body of theoretical insights and empirical findings on security price formation that have come to form a well-defined field within financial economics known as "market microstructure." Focusing on liquidity and price discovery, the book analyzes the tension between the two, pointing out that when price-relevant information reaches the market through trading pressure rather than through a public announcement, liquidity may suffer. It also confronts many striking phenomena in securities markets and uses the analytical tools and empirical methods of market microstructure to understand them. These include issues such as why liquidity changes over time and differs across securities, why large trades move prices up or down, and why these price changes are subsequently reversed, and why we observe temporary deviations from asset fair values"--
Author : Craig Holden
Publisher : Now Publishers
ISBN 13 : 9781601988744
Total Pages : 90 pages
Book Rating : 4.9/5 (887 download)
Download or read book The Empirical Analysis of Liquidity written by Craig Holden and published by Now Publishers. This book was released on 2014-11-28 with total page 90 pages. Available in PDF, EPUB and Kindle. Book excerpt: We provide a synthesis of the empirical evidence on market liquidity. The liquidity measurement literature has established standard measures of liquidity that apply to broad categories of market microstructure data. Specialized measures of liquidity have been developed to deal with data limitations in specific markets, to provide proxies from daily data, and to assess institutional trading programs. The general liquidity literature has established local cross-sectional patterns, global cross-sectional patterns, and time-series patterns.
Author : Maureen O'Hara
Publisher : John Wiley & Sons
ISBN 13 : 0631207619
Total Pages : 310 pages
Book Rating : 4.6/5 (312 download)
Download or read book Market Microstructure Theory written by Maureen O'Hara and published by John Wiley & Sons. This book was released on 1998-03-06 with total page 310 pages. Available in PDF, EPUB and Kindle. Book excerpt: Written by one of the leading authorities in market microstructure research, this book provides a comprehensive guide to the theoretical work in this important area of finance.
