Empirical anaylsis of liquidity provision of an order driven market

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Abstract

This paper studies how liquidity evolves in a limit order market. By considering the determinants and consequences of the limit and market orders submission, we find that the tradeoff between limit orders and market orders depends on liquidity supply, proxy by the limit order size and the bid-ask spread. We find that increase in limit orders attract market orders, which increase the liquidity demand. Spread only has a significant negative effect on the market orders. Order size only has significant negative effect on the limit orders.

Original languageEnglish
Title of host publicationProceedings of the 2013 IEEE Conference on Computational Intelligence for Financial Engineering and Economics, CIFEr 2013 - 2013 IEEE Symposium Series on Computational Intelligence, SSCI 2013
Pages14-18
Number of pages5
DOIs
Publication statusPublished - 2013 Oct 28
Event2013 IEEE Conference on Computational Intelligence for Financial Engineering and Economics, CIFEr 2013 - 2013 IEEE Symposium Series on Computational Intelligence, SSCI 2013 - Singapore, Singapore
Duration: 2013 Apr 162013 Apr 19

Publication series

NameProceedings of the 2013 IEEE Conference on Computational Intelligence for Financial Engineering and Economics, CIFEr 2013 - 2013 IEEE Symposium Series on Computational Intelligence, SSCI 2013

Other

Other2013 IEEE Conference on Computational Intelligence for Financial Engineering and Economics, CIFEr 2013 - 2013 IEEE Symposium Series on Computational Intelligence, SSCI 2013
CountrySingapore
CitySingapore
Period13/4/1613/4/19

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Keywords

  • Bid-Ask Spread
  • Limit Order Book
  • Order Size
  • Order flow

ASJC Scopus subject areas

  • Artificial Intelligence
  • Economics, Econometrics and Finance (miscellaneous)

Cite this

Cheung, W. (2013). Empirical anaylsis of liquidity provision of an order driven market. In Proceedings of the 2013 IEEE Conference on Computational Intelligence for Financial Engineering and Economics, CIFEr 2013 - 2013 IEEE Symposium Series on Computational Intelligence, SSCI 2013 (pp. 14-18). [6611691] (Proceedings of the 2013 IEEE Conference on Computational Intelligence for Financial Engineering and Economics, CIFEr 2013 - 2013 IEEE Symposium Series on Computational Intelligence, SSCI 2013). https://doi.org/10.1109/CIFEr.2013.6611691