This paper estimates a new measure of liquidity costs in a market driven by orders. It represents thecost of simultaneously buying and selling a given amount of shares, and it is given by a single measure of ex-ante liquidity that aggregates all available information in the limit order book for...

It seems reasonable to expect systematic liquidity shocks to affect the optimal behavior of agents in financial markets. Indeed, fluctuations in various measures of liquidity are significantly correlated across common stocks(Chordia, Roll and Subrahmanyam (2000)). Thus, this paper empirically...