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Traditional microstructure models predict that market makers' inventory positions do not impact liquidity (the effective cost of trading). Models with limited market maker riskbearing capacity predict that larger inventories negatively impact overall liquidity and the effect is greater for more...
Persistent link: https://www.econbiz.de/10012717338
We analyze the contribution to price discovery of market and limit orders by high frequency traders (HFTs) and non-HFTs. While market orders have a larger individual price impact, limit orders are far more numerous. This results in price discovery occurring predominantly through limit orders....
Persistent link: https://www.econbiz.de/10012856031
We examine the impact on stock prices of a major upgrade to the New York Stock Exchange's trading environment. The upgrade was sequentially implemented across groups of stocks. The upgrade improved information dissemination on the trading floor and reduced the latency in reporting trades and...
Persistent link: https://www.econbiz.de/10012711541
This paper studies the ability of non-informational order imbalances (buy minus sell volume) to predict daily stock returns at the market level. Using a model with three types of participants (an informed trader, liquidity traders, and a finite number of arbitrageurs), we derive predictions...
Persistent link: https://www.econbiz.de/10012712391
We use an 11-year panel of daily specialist revenues on individual NYSE stocks to explore the relationship between market-maker revenues and liquidity. If market makers suffer substantial trading losses, lenders may respond by increasing funding costs or reducing credit lines, and market makers...
Persistent link: https://www.econbiz.de/10012714374
This paper studies the ability of non-informational order imbalances (buy minus sell volume) to predict daily stock returns at the market level. Using a model with three types of participants (an informed trader, liquidity traders, and a finite number of arbitrageurs), we derive predictions...
Persistent link: https://www.econbiz.de/10012720134
In response to a regulatory enforcement, the Island electronic communications network recently stopped displaying its limit order book in the three most active exchange-traded funds (ETFs). As a result of this reduction in pre-trade transparency, this dominant venue's share of trading activity...
Persistent link: https://www.econbiz.de/10012706605
Persistent link: https://www.econbiz.de/10012195436
Persistent link: https://www.econbiz.de/10012299034
Traditional liquidity measures can provide a false impression of the liquidity and stability of financial market trading. Using data on auctions (bids wanted in competition; BWICs) from the collateralized loan obligation (CLO) market, we show that a standard measure of liquidity, the effective...
Persistent link: https://www.econbiz.de/10012271211