Faculty of Economics and Business Administration Publications Database

Limit-order Submission Strategies under Assymetric Information

Selected
Authors:
Menkhoff, Lukas
Osler, Carol L.
Source:
Volume: 34
Number: 11
Pages: 2665 - 2677
Month: November
ISSN-Print: 0378-4266
Link External Source: Online Version
Year: 2010
Keywords: Limit-order market; Order submission; Informed traders; Market conditions
Abstract:

This paper provides evidence that informed traders dominate the response of limit-order submissions to shocks in a pure limit-order market. In the market we study, informed traders are highly sensitive to spreads, volatility, momentum and depth. By contrast, uninformed traders are relatively insensitive to all these market conditions. The dominance of the informed over limit-order submissions is magnified by contrasts between them and the uninformed in the use of aggressively-priced limit orders.

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