We show that wealth processes in the block-shaped order book model of Obizhaeva/Wang converge to their counterparts in the reduced-form model proposed by Almgren/Chriss, as the resilience of the order book tends to infinity. As an application of this limit theorem, we explain how to reduce...

Based on reconstructed high-frequency limit order book data, we provide empirical evidence of systematic liquidity co-variation across DAX-30 stocks. We show that commonality in liquidity is even more crucial beyond the best limits, and that liquidity shocks are correlated across different order...

Pervasive herding may cause homogenous trading patterns, both within and across stocks and thus may impact upon an important aspect of the market microstructure – liquidity. Potentially, herding could simultaneously affect the liquidity of both individual stocks and that of the market. For...

This paper investigates the market microstructure of the Shanghai and Shenzhen Stock Exchanges. The two major Chinese stock markets are pure order-driven trading mechanisms without market makers, and we analyze empirically both limit order books. We begin our empirical modeling using the vector...

Since European trading now traverses national boundaries, and MTFs are rampant, how have the stock price dynamics changed? Analysing the execution channels NYSE Euronext Paris, Chi-X and BATS in CAC40 stocks, we compare metrics of market efficiency pre/post-MiFID and provide insight into the...