# So What Orders Do Informed Traders Use?*

Save this PDF as:

Size: px
Start display at page:

## Transcription

9 Informed Traders 1875 buy if 1 mp[v b (LB)] v a or equivalently if a mpb (LB) v c {. (1) 1 1 mp 2 In order to proceed, we first conjecture that in equilibrium v 1 c 1 a1 1 max [m, b 2(LB)] 1 v and later show that our conjecture in fact holds in equilibrium. Since c 1 a1 1 max [m, b 2(LB)], an informed trader will place a limit buy order if and only if c 1 v max [m, b 2(LB)]. Specifically, when the value of the asset is above the ask ( a 1 ) and below c, an informed trader will place a limit buy order. For such a trader the benefit of obtaining a potential lower price outweighs the execution risk of a limit order, and she will place a limit order even though the asset value is above the ask. However, if the value of the asset is above c, the benefit of sure execution dominates. On the one hand, on date 1, 1 2 Pr [MBFv] p m(1 l) (1 m)1, 1 2 {v max(c,a 1)} Pr [LBFv] p ml (1 m)1. (2) {c1v max[m,b 2(LB)]} On the other hand, on date 2 conditional on a limit buy on date 1, 1 2 Pr [MSFLB, v] p m (1 m)1, (3) {v! b 2 } and applying Bayes rule yields v xg(x)pr[mbfx]dx v a p E[vFMB] p, 1 v g(x)pr[mbfx]dx v v xg(x)pr[lbfx]pr[msflb, x]dx v b (LB) p E[vFLB, MS] p. (4) 2 v g(x)pr[lbfx]pr[msflb, x]dx v Combining equations (2), (3), and (4) yields that in equilibrium the following holds: v 1 1 m (1 l)(m a 1) (x a )g(x)dx p 0 (5) 2(1 m) max(c,a )

10 1876 Journal of Business and { c 2 2 ml [m b 2(LB)] [x b (LB)]g(x)dx 2(1 m) max[m,b (LB)] 2 v b (LB) 2 l [x b (LB)]g(x)dx p 0. (6) } Furthermore, the participation constraint of the patient uninformed traders requires that 1 2 (1 p)m pm[b (LB) m] b 2(LB) 2 v 2 v 1 b 2(LB) [ ] p(1 m) b (LB)g(x)dx xg(x)dx! a, (7) where the left-hand side represents the expected transaction price from submitting a limit order and the right-hand side represents the transaction price from submitting a market order. By construction, any solution of (5) and (6) that also satisfies (7) will be an equilibrium. The following proposition provides conditions for the existence of such an equilibrium. Proposition 2. 3 If (m, l, p) (0, 1) and xg(x)dx!, then an equilibrium exists. Proof. See Appendix A. Proposition 2 is dependent on our conjecture that v 1 c 1 a 1 max [m, 1 b 2(LB)] 1 v. The following lemma demonstrates that our conjecture indeed holds. Lemma 1. In equilibrium, v 1 c 1 a1 1 max [m, b 2(LB)] 1 v. Proof. See Appendix A. While Rock (1990) has conjectured that in equilibrium the informed traders will use only market orders, combining lemma 1 with the existence of an equilibrium implies that informed traders may in fact use both market and limit orders in equilibrium; as discussed earlier, informed traders may use limit orders even when the asset value is outside the bid-ask spread. It is worthwhile to note that the restrictions we impose on the distribution of the asset values are not critical for these results and are mainly for expositional purposes. Specifically, the assumption of symmetry of the density function around the mean is imposed simply to enable us to characterize the equilibrium by looking at only one side of the market and is not required to obtain the results. We next demonstrate that not only do informed traders use limit orders, but also there exist equilibria in which a limit order conveys more information than a market order. v 0

20 TABLE 2 Decile Relative Informativeness of Order Types: One-Hour Horizon Sell Orders Buy Orders Small Medium Large Small Medium Large A. At the Quote Active {1.99} {1.99} {.33} {1.99} {1.99} {.43} (.40;.29; 24,236) (.39;.26; 2,229) (.40;.41; 3,058) (.43;.29; 25,794) (.45;.30;,2538) (.46;.47; 3,513) {1.99} {1.99} {.63} {1.99} {.94} {.18} (.34;.25; 4,646) (.34;.22; 641) (.37;.36; 1,269) (.35;.29; 5,822) (.34;.29; 692) (.39;.43; 1,381) {1.99} {.95} {.12} {.99} {.85} {.26} (.36;.31; 2,450) (.32;.27; 504) (.38;.42; 1,117) (.37;.34; 2,660) (.39;.35; 484) (.40;.43; 982) {1.99} {.81} {.34} {!.01} {.58} {.01} (.20;.16; 1,226) (.28;.25; 259) (.30;.32; 642) (.20;.26; 1,786) (.30;.29; 269) (.31;.40; 691) {1.99} {.90} {.82} {1.99} {.97} {.15} (.31;.23; 857) (.31;.25; 219) (.35;.31; 665) (.32;.25; 1,020) (.32;.23; 283) (.34;.38; 768) {.90} {.61} {.35} {1.99} {.98} {.31} (.24;.21; 490) (.27;.26; 156) (.33;.35; 471) (.25;.19; 549) (.33;.21; 171) (.34;.37; 498) {1.99} {.94} {.24} {.97} {.99} {.02} (.22;.13; 278) (.24;.15; 93) (.28;.32; 326) (.25;.21; 434) (.31;.17; 136) (.31;.42; 395) {1.99} {.22} {.39} {.92} {.64} {.25} (.24;.13; 188) (.26;.31; 90) (.30;.31; 271) (.26;.22; 250) (.32;.29; 102) (.29;.33; 271) 1886 Journal of Business

### Financial Market Microstructure Theory

The Microstructure of Financial Markets, de Jong and Rindi (2009) Financial Market Microstructure Theory Based on de Jong and Rindi, Chapters 2 5 Frank de Jong Tilburg University 1 Determinants of the

### Financial Markets. Itay Goldstein. Wharton School, University of Pennsylvania

Financial Markets Itay Goldstein Wharton School, University of Pennsylvania 1 Trading and Price Formation This line of the literature analyzes the formation of prices in financial markets in a setting

### Decimalization and market liquidity

Decimalization and market liquidity Craig H. Furfine On January 29, 21, the New York Stock Exchange (NYSE) implemented decimalization. Beginning on that Monday, stocks began to be priced in dollars and

### Limit Orders, Depth, and Volatility: Evidence from the Stock Exchange of Hong Kong

THE JOURNAL OF FINANCE VOL. LVI, NO. 2 APRIL 2001 Limit Orders, Depth, and Volatility: Evidence from the Stock Exchange of Hong Kong HEE-JOON AHN, KEE-HONG BAE, and KALOK CHAN* ABSTRACT We investigate

### Price Movement Effects on the State of the Electronic Limit-Order Book

The Financial Review 40 (2005) 195--221 Price Movement Effects on the State of the Electronic Limit-Order Book Yue-cheong Chan Hong Kong Polytechnic University Abstract This paper investigates public-trader

### SLICE ORDER IN TASE STRATEGY TO HIDE?

SLICE ORDER IN TASE STRATEGY TO HIDE? Isabel Tkatch and Zinat Shaila Alam* Department of Finance, J. Mack Robinson College of Business Georgia State University Atlanta, GA 30303 August 21, 2007 ABSTRACT

### Are Investors more Aggressive in Transparent Markets?

Asia-Pacific Journal of Financial Studies (2008) v37 n2 pp343-380 Are Investors more Aggressive in Transparent Markets? Tai Ma ** National Sun Yat-sen University, Taiwan Yaling Lin Shih Chien University,

### Traders choice between limit and market orders: evidence from NYSE stocks \$

Journal of Financial Markets 6 (2003) 517 538 Traders choice between limit and market orders: evidence from NYSE stocks \$ Kee-Hong Bae, Hasung Jang, Kyung Suh Park* School of Business Administration, Korea

### Technology and Liquidity Provision: The Blurring of Traditional Definitions

Technology and Liquidity Provision: The Blurring of Traditional Definitions Joel Hasbrouck and Gideon Saar This version: November 3, 2004 Joel Hasbrouck and Gideon Saar are from the Stern School of Business,

### UNIVERSITÀ DELLA SVIZZERA ITALIANA MARKET MICROSTRUCTURE AND ITS APPLICATIONS

UNIVERSITÀ DELLA SVIZZERA ITALIANA MARKET MICROSTRUCTURE AND ITS APPLICATIONS Course goals This course introduces you to market microstructure research. The focus is empirical, though theoretical work

### Toxic Arbitrage. Abstract

Toxic Arbitrage Thierry Foucault Roman Kozhan Wing Wah Tham Abstract Arbitrage opportunities arise when new information affects the price of one security because dealers in other related securities are

### Competition Among Market Centers

Competition Among Market Centers Marc L. Lipson* University of Virginia November, 2004 * Contact information: Darden Graduate School of Business, University of Virginia, Charlottesville, VA 22901; 434-924-4837;

### Order dynamics: Recent evidence from the NYSE

Available online at www.sciencedirect.com Journal of Empirical Finance 14 (2007) 636 661 www.elsevier.com/locate/jempfin Order dynamics: Recent evidence from the NYSE Andrew Ellul a, Craig W. Holden a,

### 2. Information Economics

2. Information Economics In General Equilibrium Theory all agents had full information regarding any variable of interest (prices, commodities, state of nature, cost function, preferences, etc.) In many

### MARKET STRUCTURE AND INSIDER TRADING. Keywords: Insider Trading, Stock prices, Correlated signals, Kyle model

MARKET STRUCTURE AND INSIDER TRADING WASSIM DAHER AND LEONARD J. MIRMAN Abstract. In this paper we examine the real and financial effects of two insiders trading in a static Jain Mirman model (Henceforth

### Specialist Markets. Forthcoming in the Encyclopedia of Quantitative Finance ABSTRACT

1 Specialist Markets Forthcoming in the Encyclopedia of Quantitative Finance ABSTRACT The specialist market system is defined as a hybrid market structure that includes an auction component (e.g., a floor

### Are Market Center Trading Cost Measures Reliable? *

JEL Classification: G19 Keywords: equities, trading costs, liquidity Are Market Center Trading Cost Measures Reliable? * Ryan GARVEY Duquesne University, Pittsburgh (Garvey@duq.edu) Fei WU International

### Finance 400 A. Penati - G. Pennacchi Market Micro-Structure: Notes on the Kyle Model

Finance 400 A. Penati - G. Pennacchi Market Micro-Structure: Notes on the Kyle Model These notes consider the single-period model in Kyle (1985) Continuous Auctions and Insider Trading, Econometrica 15,

### Stock Market Liquidity: Determinants and Implications *

Tijdschrift voor Economie en Management Vol. LII, 2, 2007 Stock Market Liquidity: Determinants and Implications * by G. WUYTS Gunther Wuyts KULeuven, Department of Accountancy, Finance and Insurance, Leuven

### THE FUNDAMENTAL THEOREM OF ARBITRAGE PRICING

THE FUNDAMENTAL THEOREM OF ARBITRAGE PRICING 1. Introduction The Black-Scholes theory, which is the main subject of this course and its sequel, is based on the Efficient Market Hypothesis, that arbitrages

### Online Appendix Feedback Effects, Asymmetric Trading, and the Limits to Arbitrage

Online Appendix Feedback Effects, Asymmetric Trading, and the Limits to Arbitrage Alex Edmans LBS, NBER, CEPR, and ECGI Itay Goldstein Wharton Wei Jiang Columbia May 8, 05 A Proofs of Propositions and

### Determinants of Order Choice on the New York Stock Exchange

Determinants of Order Choice on the New York Stock Exchange Andrew Ellul Indiana University Craig W. Holden Indiana University Pankaj Jain University of Memphis and Robert Jennings Indiana University August

### A Theory of Intraday Patterns: Volume and Price Variability

A Theory of Intraday Patterns: Volume and Price Variability Anat R. Admati Paul Pfleiderer Stanford University This article develops a theory in which concentrated-trading patterns arise endogenously as

### Participation Strategy of the NYSE Specialists to the Trades

Journal of Economic and Social Research 10(1) 2008, 73-113 Participation Strategy of the NYSE Bülent Köksal Abstract. Using 2001 NYSE system order data in the decimal pricing environment, we analyze how

### Market Microstructure: An Interactive Exercise

Market Microstructure: An Interactive Exercise Jeff Donaldson, University of Tampa Donald Flagg, University of Tampa ABSTRACT Although a lecture on microstructure serves to initiate the inspiration of

### Trade Size and the Adverse Selection Component of. the Spread: Which Trades Are "Big"?

Trade Size and the Adverse Selection Component of the Spread: Which Trades Are "Big"? Frank Heflin Krannert Graduate School of Management Purdue University West Lafayette, IN 47907-1310 USA 765-494-3297

### Informed Trading and Maker-Taker Fees in a Low-Latency Limit Order Market

Informed Trading and Maker-Taker Fees in a Low-Latency Limit Order Market Michael Brolley Katya Malinova University of Toronto October 7, 2013 Abstract We model a financial market where privately informed

### Department of Economics and Related Studies Financial Market Microstructure. Topic 1 : Overview and Fixed Cost Models of Spreads

Session 2008-2009 Department of Economics and Related Studies Financial Market Microstructure Topic 1 : Overview and Fixed Cost Models of Spreads 1 Introduction 1.1 Some background Most of what is taught

### Trading Aggressiveness and Market Breadth Around Earnings Announcements

Trading Aggressiveness and Market Breadth Around Earnings Announcements Sugato Chakravarty Purdue University Matthews Hall 812 West State Street West Lafayette, IN 47906 sugato@purdue.edu Pankaj Jain Fogelman

### The High-Volume Return Premium: Evidence from Chinese Stock Markets

The High-Volume Return Premium: Evidence from Chinese Stock Markets 1. Introduction If price and quantity are two fundamental elements in any market interaction, then the importance of trading volume in

### Asymmetric Information (2)

Asymmetric nformation (2) John Y. Campbell Ec2723 November 2013 John Y. Campbell (Ec2723) Asymmetric nformation (2) November 2013 1 / 24 Outline Market microstructure The study of trading costs Bid-ask

### THE INTRADAY PATTERN OF INFORMATION ASYMMETRY: EVIDENCE FROM THE NYSE

THE INTRADAY PATTERN OF INFORMATION ASYMMETRY: EVIDENCE FROM THE NYSE A Thesis Submitted to The College of Graduate Studies and Research in Partial Fulfillment of the Requirements for the Degree of Master

### Clean Sweep: Informed Trading through Intermarket Sweep Orders

Clean Sweep: Informed Trading through Intermarket Sweep Orders Sugato Chakravarty Purdue University Matthews Hall 812 West State Street West Lafayette, IN 47906 sugato@purdue.edu Pankaj Jain Fogelman College

### Market Microstructure. Hans R. Stoll. Owen Graduate School of Management Vanderbilt University Nashville, TN 37203 Hans.Stoll@Owen.Vanderbilt.

Market Microstructure Hans R. Stoll Owen Graduate School of Management Vanderbilt University Nashville, TN 37203 Hans.Stoll@Owen.Vanderbilt.edu Financial Markets Research Center Working paper Nr. 01-16

### A Simple Cost Reduction Strategy for Small Liquidity Traders: Trade at the Opening

JOURNAL OF FINANCIAL AND QUANTITATIVE ANALYSIS VOL, 32, NO, 4, DECEMBER 1997 A Simple Cost Reduction Strategy for Small Liquidity Traders: Trade at the Opening Raymond M. Brooks and Tie Su* Abstract We

### CFDs and Liquidity Provision

2011 International Conference on Financial Management and Economics IPEDR vol.11 (2011) (2011) IACSIT Press, Singapore CFDs and Liquidity Provision Andrew Lepone and Jin Young Yang Discipline of Finance,

### Chapter 7. Sealed-bid Auctions

Chapter 7 Sealed-bid Auctions An auction is a procedure used for selling and buying items by offering them up for bid. Auctions are often used to sell objects that have a variable price (for example oil)

### Trading Costs and Taxes!

Trading Costs and Taxes! Aswath Damodaran Aswath Damodaran! 1! The Components of Trading Costs! Brokerage Cost: This is the most explicit of the costs that any investor pays but it is usually the smallest

### Returns Achieved by International and Local Investors in Stock Markets: Comparative Study using Evidence from the MENA Region Conceptual Framework

Returns Achieved by International and Local Investors in Stock Markets: Comparative Study using Evidence from the MENA Region Conceptual Framework 1 st May 2016 1 RETURNS ACHIEVED BY INTERNATIONAL AND

### Trading Fees and Efficiency in Limit Order Markets.

Trading Fees and Efficiency in Limit Order Markets. Jean-Edouard Colliard Paris School of Economics 48 boulevard Jourdan 75014 Paris, France colliard@pse.ens.fr Thierry Foucault HEC, Paris 1 rue de la

### Hidden Liquidity: An Analysis of Order Exposure Strategies in Electronic Stock Markets*

Hidden Liquidity: An Analysis of Order Exposure Strategies in Electronic Stock Markets* Hendrik Bessembinder University of Utah finhb@business.utah.edu Marios Panayides University of Utah finmp@business.utah.edu

### Hedging by Options Market Makers: Theory and Evidence. Sahn-Wook Huh. Hao Lin. Antonio S. Mello *

Hedging by Options Market Makers: Theory and Evidence Sahn-Wook Huh Hao Lin Antonio S. Mello * [Current Version: November 30, 2012] School of Management, University (SUNY) at Buffalo, Buffalo, NY 14260-4000.

### Liquidity-Based Competition for Order Flow

Liquidity-Based Competition for Order Flow Christine A. Parlour Carnegie Mellon University Duane J. Seppi Carnegie Mellon University We present a microstructure model of competition for order flow between

### Aggressiveness in Investor Order Submission Strategy in the Absence of Trading: Evidence from the Market Preopening Period.

Aggressiveness in Investor Order Submission Strategy in the Absence of Trading: Evidence from the Market Preopening Period. Michael Bowe Stuart Hyde Ike Johnson Preliminary draft: Not for quotation Abstract

### How to Close a Stock Market? The Impact of a Closing Call Auction on Prices and Trading Strategies 1

How to Close a Stock Market? The Impact of a Closing Call Auction on Prices and Trading Strategies 1 Luisella Bosetti Borsa Italiana Eugene Kandel Hebrew University and CEPR Barbara Rindi Università Bocconi

### The (implicit) cost of equity trading at the Oslo Stock Exchange. What does the data tell us?

The (implicit) cost of equity trading at the Oslo Stock Exchange. What does the data tell us? Bernt Arne Ødegaard Sep 2008 Abstract We empirically investigate the costs of trading equity at the Oslo Stock

### Trading Fees and Effi ciency in Limit Order Markets.

Trading Fees and Effi ciency in Limit Order Markets. Jean-Edouard Colliard Paris School of Economics 48 boulevard Jourdan 75014 Paris, France colliard@pse.ens.fr Thierry Foucault HEC, Paris 1 rue de la

### How aggressive are high frequency traders?

How aggressive are high frequency traders? Björn Hagströmer, Lars Nordén and Dong Zhang Stockholm University School of Business, S 106 91 Stockholm July 30, 2013 Abstract We study order aggressiveness

### Supervised Learning of Market Making Strategy

Supervised Learning of Market Making Strategy Ori Gil Gal Zahavi April 2, 2012 Abstract Many economic markets, including most major stock exchanges, employ market-makers to aid in the transactions and

### Markus K. Brunnermeier

Institutional tut Finance Financial Crises, Risk Management and Liquidity Markus K. Brunnermeier Preceptor: Dong BeomChoi Princeton University 1 Market Making Limit Orders Limit order price contingent

### Trading for News: an Examination of Intraday Trading Behaviour of Australian Treasury-Bond Futures Markets

Trading for News: an Examination of Intraday Trading Behaviour of Australian Treasury-Bond Futures Markets Liping Zou 1 and Ying Zhang Massey University at Albany, Private Bag 102904, Auckland, New Zealand

### Execution Costs. Post-trade reporting. December 17, 2008 Robert Almgren / Encyclopedia of Quantitative Finance Execution Costs 1

December 17, 2008 Robert Almgren / Encyclopedia of Quantitative Finance Execution Costs 1 Execution Costs Execution costs are the difference in value between an ideal trade and what was actually done.

### Unraveling versus Unraveling: A Memo on Competitive Equilibriums and Trade in Insurance Markets

Unraveling versus Unraveling: A Memo on Competitive Equilibriums and Trade in Insurance Markets Nathaniel Hendren January, 2014 Abstract Both Akerlof (1970) and Rothschild and Stiglitz (1976) show that

### Liquidity Externalities and Adverse Selection: Evidence from Trading after Hours

THE JOURNAL OF FINANCE VOL. LIX, NO. 2 APRIL 2004 Liquidity Externalities and Adverse Selection: Evidence from Trading after Hours MICHAEL J. BARCLAY and TERRENCE HENDERSHOTT ABSTRACT This paper examines

### Liquidity Cycles and Make/Take Fees in Electronic Markets

Liquidity Cycles and Make/Take Fees in Electronic Markets Thierry Foucault (HEC, Paris) Ohad Kadan (Washington U) Eugene Kandel (Hebrew U) April 2011 Thierry, Ohad, and Eugene () Liquidity Cycles & Make/Take

### A new model of a market maker

A new model of a market maker M.C. Cheung 28786 Master s thesis Economics and Informatics Specialisation in Computational Economics and Finance Erasmus University Rotterdam, the Netherlands January 6,

### Goal Market Maker Pricing and Information about Prospective Order Flow

Goal Market Maker Pricing and Information about Prospective Order Flow EIEF October 9 202 Use a risk averse market making model to investigate. [Microstructural determinants of volatility, liquidity and

### AN ANALYSIS OF EXISTING ARTIFICIAL STOCK MARKET MODELS FOR REPRESENTING BOMBAY STOCK EXCHANGE (BSE)

AN ANALYSIS OF EXISTING ARTIFICIAL STOCK MARKET MODELS FOR REPRESENTING BOMBAY STOCK EXCHANGE (BSE) PN Kumar Dept. of CSE Amrita Vishwa Vidyapeetham Ettimadai, Tamil Nadu, India pn_kumar@cb.amrita.edu

### Clean Sweep: Informed Trading through Intermarket Sweep Orders

Clean Sweep: Informed Trading through Intermarket Sweep Orders Sugato Chakravarty Purdue University Pankaj Jain University of Memphis James Upson * University of Texas, El Paso Robert Wood University of

### An Empirical Analysis of Market Fragmentation on U.S. Equities Markets

An Empirical Analysis of Market Fragmentation on U.S. Equities Markets Frank Hatheway The NASDAQ OMX Group, Inc. Amy Kwan The University of Sydney Capital Markets Cooperative Research Center Hui Zheng*

### Aggressive Orders and the Resiliency of a Limit Order Market

Aggressive Orders and the Resiliency of a Limit Order Market Hans Degryse *,**, Frank de Jong ***, Maarten van Ravenswaaij ****, Gunther Wuyts * This version: 2003-03-21 * K.U. Leuven, Department of Economics,

### Measures of implicit trading costs and buy sell asymmetry

Journal of Financial s 12 (2009) 418 437 www.elsevier.com/locate/finmar Measures of implicit trading costs and buy sell asymmetry Gang Hu Babson College, 121 Tomasso Hall, Babson Park, MA 02457, USA Available

### Liquidity Supply and Volatility: Futures Market Evidence *

Liquidity Supply and Volatility: Futures Market Evidence * Peter R. Locke Commodity Futures Trading Commission George Washington University Asani Sarkar Federal Reserve Bank of New York 33 Liberty Street

### Is there Information Content in Insider Trades in the Singapore Exchange?

Is there Information Content in Insider Trades in the Singapore Exchange? Wong Kie Ann a, John M. Sequeira a and Michael McAleer b a Department of Finance and Accounting, National University of Singapore

### An Analysis of High Frequency Trading Activity

An Analysis of High Frequency Trading Activity Michael D. McKenzie Professor of Finance University of Liverpool Management School Chatham Street Liverpool L69 7DH United Kingdom Email : michael.mckenzie@liverpool.ac.uk

### Market Microstructure & Trading Universidade Federal de Santa Catarina Syllabus. Email: rgencay@sfu.ca, Web: www.sfu.ca/ rgencay

Market Microstructure & Trading Universidade Federal de Santa Catarina Syllabus Dr. Ramo Gençay, Objectives: Email: rgencay@sfu.ca, Web: www.sfu.ca/ rgencay This is a course on financial instruments, financial

### Internalization, Clearing and Settlement, and Stock Market Liquidity 1

Internalization, Clearing and Settlement, and Stock Market Liquidity 1 Hans Degryse, Mark Van Achter 3, and Gunther Wuyts 4 November 010 1 We would like to thank Cecilia Caglio, Sarah Draus, Jérémie Lefebvre,

### Order Submission Strategies and Information: Empirical Evidence from the NYSE

Order Submission Strategies and Information: Empirical Evidence from the NYSE Alessandro Beber HEC University of Lausanne and FAME Cecilia Caglio U.S. Securities and Exchange Commission First Draft: August

### Internet Appendix to Momentum, Reversal, and Uninformed Traders in Laboratory Markets * 1. I. Instructions for Experiment One

Internet Appendix to Momentum, Reversal, and Uninformed Traders in Laboratory Markets * 1 I. Instructions for Experiment One Overview During this session, you will trade shares in 12 different securities

### The Effect of Maker-Taker Fees on Investor Order Choice and. Execution Quality in U.S. Stock Markets

The Effect of Maker-Taker Fees on Investor Order Choice and Execution Quality in U.S. Stock Markets Shawn M. O Donoghue October 30, 2014 Abstract Equity exchanges competing for orders are using new pricing

### Complementarities in information acquisition with short-term trades

Theoretical Economics (007), 441 467 1555-7561/0070441 Complementarities in information acquisition with short-term trades CHRISTOPHE CHAMLEY Paris-Jourdan Sciences Économiques and Department of Economics,

### Limited attention and the allocation of effort in securities trading

Limited attention and the allocation of effort in securities trading Shane A. Corwin a, *, Jay F. Coughenour b a Mendoza College of Business, University of Notre Dame, Notre Dame, IN 46556 b Lerner College

### The Effects of Make and Take Fees in Experimental Markets

The Effects of Make and Take Fees in Experimental Markets Vince Bourke and David Porter Economic Science Institute Chapman University Abstract: We conduct a series of experiments to examine the effects

### Chapter 2 Microstructure Foundations

Chapter 2 Microstructure Foundations This chapter gives an overview of institutional and theoretical market microstructure foundations. Section 2.1 introduces to the institutional framework of trading

### Does an electronic stock exchange need an upstairs market?

Journal of Financial Economics 00 (2001) 000-000 Does an electronic stock exchange need an upstairs market? Hendrik Bessembinder a *, Kumar Venkataraman b a David Eccles School of Business, University

### Market Structure, Liquidity, and Information Based Trading at. the Prague Stock Exchange

Market Structure, Liquidity, and Information Based Trading at the Prague Stock Exchange Libor Němeček, CERGE-EI and Jan Hanousek, CERGE-EI and WDI 1 Abstract: This paper investigates the relation between

### Inflation. Chapter 8. 8.1 Money Supply and Demand

Chapter 8 Inflation This chapter examines the causes and consequences of inflation. Sections 8.1 and 8.2 relate inflation to money supply and demand. Although the presentation differs somewhat from that

### Financial Markets and Institutions Abridged 10 th Edition

Financial Markets and Institutions Abridged 10 th Edition by Jeff Madura 1 12 Market Microstructure and Strategies Chapter Objectives describe the common types of stock transactions explain how stock transactions

### FIA PTG Whiteboard: Frequent Batch Auctions

FIA PTG Whiteboard: Frequent Batch Auctions The FIA Principal Traders Group (FIA PTG) Whiteboard is a space to consider complex questions facing our industry. As an advocate for data-driven decision-making,

### Why do foreign investors underperform domestic investors in trading activities? Evidence from Indonesia \$

Journal of Financial Markets ] (]]]]) ]]] ]]] www.elsevier.com/locate/finmar Why do foreign investors underperform domestic investors in trading activities? Evidence from Indonesia \$ Sumit Agarwal a,b,1,

### Execution Costs of Exchange Traded Funds (ETFs)

MARKET INSIGHTS Execution Costs of Exchange Traded Funds (ETFs) By Jagjeev Dosanjh, Daniel Joseph and Vito Mollica August 2012 Edition 37 in association with THE COMPANY ASX is a multi-asset class, vertically

### A Simple Model of Price Dispersion *

Federal Reserve Bank of Dallas Globalization and Monetary Policy Institute Working Paper No. 112 http://www.dallasfed.org/assets/documents/institute/wpapers/2012/0112.pdf A Simple Model of Price Dispersion

### High-frequency trading in a limit order book

High-frequency trading in a limit order book Marco Avellaneda & Sasha Stoikov October 5, 006 Abstract We study a stock dealer s strategy for submitting bid and ask quotes in a limit order book. The agent

### Fixed odds bookmaking with stochastic betting demands

Fixed odds bookmaking with stochastic betting demands Stewart Hodges Hao Lin January 4, 2009 Abstract This paper provides a model of bookmaking in the market for bets in a British horse race. The bookmaker

### Hide-and-Seek in the Market: Placing and Detecting Hidden Orders

EDHEC RISK AND ASSET MANAGEMENT RESEARCH CENTRE 393-400 promenade des Anglais 06202 Nice Cedex 3 Tel.: +33 (0)4 93 18 32 53 E-mail: research@edhec-risk.com Web: www.edhec-risk.com Hide-and-Seek in the

### Should Exchanges impose Market Maker obligations? Amber Anand. Kumar Venkataraman. Abstract

Should Exchanges impose Market Maker obligations? Amber Anand Kumar Venkataraman Abstract We study the trades of two important classes of market makers, Designated Market Makers (DMMs) and Endogenous Liquidity

### The Quality of Floor and Electronic Trading Systems Directly Compared: Evidence from a Natural Experiment on the German Stock Market *

The Quality of Floor and Electronic Trading Systems Directly Compared: Evidence from a Natural Experiment on the German Stock Market * Christiane Schoene a,** and Martin T. Bohl b a,b Westfaelische Wilhelms-University

### Trading Activity and Stock Price Volatility: Evidence from the London Stock Exchange

Trading Activity and Stock Price Volatility: Evidence from the London Stock Exchange Roger D. Huang Mendoza College of Business University of Notre Dame and Ronald W. Masulis* Owen Graduate School of Management

### Journal Of Financial And Strategic Decisions Volume 9 Number 2 Summer 1996

Journal Of Financial And Strategic Decisions Volume 9 Number 2 Summer 1996 THE USE OF FINANCIAL RATIOS AS MEASURES OF RISK IN THE DETERMINATION OF THE BID-ASK SPREAD Huldah A. Ryan * Abstract The effect

IMPLICIT COLLUSION IN DEALER MARKETS WITH DIFFERENT COSTS OF MARKET MAKING ANDREAS KRAUSE Abstract. This paper introduces dierent costs into the Dutta-Madhavan model of implicit collusion between market

### ECON 459 Game Theory. Lecture Notes Auctions. Luca Anderlini Spring 2015

ECON 459 Game Theory Lecture Notes Auctions Luca Anderlini Spring 2015 These notes have been used before. If you can still spot any errors or have any suggestions for improvement, please let me know. 1

### Dynamics of market liquidity of Japanese stocks: An analysis of tick-by-tick data of the Tokyo Stock Exchange

Dynamics of market liquidity of Japanese stocks: An analysis of tick-by-tick data of the Tokyo Stock Exchange Jun Muranaga* Bank of Japan Abstract The purpose of this study is to study dynamic aspects

### Journal Of Financial And Strategic Decisions Volume 8 Number 3 Fall 1995

Journal Of Financial And Strategic Decisions Volume 8 Number 3 Fall 1995 EXPECTATIONS OF WEEKEND AND TURN-OF-THE-MONTH MEAN RETURN SHIFTS IMPLICIT IN INDEX CALL OPTION PRICES Amy Dickinson * and David

### Limited Attention and the Allocation of Effort in Securities Trading

Limited Attention and the Allocation of Effort in Securities Trading SHANE A. CORWIN and JAY F. COUGHENOUR * ABSTRACT While limited attention has been analyzed in a variety of economic and psychological

### NYSE order flow, spreads, and information \$

Journal of Financial Markets 6 (2003) 309 335 NYSE order flow, spreads, and information \$ Ingrid M. Werner* Fisher College of Business, The Ohio State University, 2100 Neil Avenue, Columbus, OH 43210,

### FE570 Financial Markets and Trading. Stevens Institute of Technology

FE570 Financial Markets and Trading Lecture 13. Execution Strategies (Ref. Anatoly Schmidt CHAPTER 13 Execution Strategies) Steve Yang Stevens Institute of Technology 11/27/2012 Outline 1 Execution Strategies

### Momentum Traders in the Housing Market: Survey Evidence and a Search Model

Federal Reserve Bank of Minneapolis Research Department Staff Report 422 March 2009 Momentum Traders in the Housing Market: Survey Evidence and a Search Model Monika Piazzesi Stanford University and National

### CPC/CPA Hybrid Bidding in a Second Price Auction

CPC/CPA Hybrid Bidding in a Second Price Auction Benjamin Edelman Hoan Soo Lee Working Paper 09-074 Copyright 2008 by Benjamin Edelman and Hoan Soo Lee Working papers are in draft form. This working paper