The role of time in price discovery

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dc.contributor.author Ben Sita, Bernard en_US
dc.contributor.author Westerholm, P. Westerholm en_US
dc.date.accessioned 2017-05-23T09:40:57Z en_US
dc.date.available 2017-05-23T09:40:57Z en_US
dc.date.issued 2017-05-23
dc.identifier.uri http://hdl.handle.net/10725/5660 en_US
dc.description.abstract In this paper we investigate the price effects of trading intensity. Extending on the Madhavan et al. (1997) model, we split the intensity effect into liquidity and information effects. We provide a measure of market quality that is the ratio of the covariance bias to the variance bias. Analyzing about 6 years of tick by tick data, we find that the bid-ask spread in a pure limit order book market contains a risk component associated with managing the time to trade, and this component accounts for roughly 19.6% of the implied bid-ask spread. Extending our model to investigate intraday patterns, we find that the adverse selection cost exhibits a U-shaped pattern reflecting uncertainty at market openings in the Helsinki Stock Exchange (HEX) and in the New York Stock Exchange (NYSE). The results emphasize the importance of managing time in limit order book markets. en_US
dc.language.iso en en_US
dc.title The role of time in price discovery en_US
dc.type Conference Paper / Proceeding en_US
dc.title.subtitle ultra-high frequency trading in a Limit Order Book Market en_US
dc.author.school SOB en_US
dc.author.idnumber 200603722 en_US
dc.author.department Department of Finance and Accounting (FINA) en_US
dc.description.embargo N/A en_US
dc.keywords Trading Intensity en_US
dc.keywords Market Microstructure en_US
dc.keywords Price Impact en_US
dc.identifier.ctation Sita, B., & Westerholm, J. (2006, June). The role of time in price discovery: Ultra-high frequency trading in a limit order book market. In Financial Management Association (FMA) European Conference. Stockholm, Sweden (pp. 8-9). en_US
dc.author.email bernard.bensita@lau.edu.lb en_US
dc.conference.date 2006 en_US
dc.conference.place Stockholm, Sweden en_US
dc.conference.title Financial Management Association (FMA) European Conference en_US
dc.identifier.tou http://libraries.lau.edu.lb/research/laur/terms-of-use/articles.php en_US
dc.identifier.url https://www.researchgate.net/publication/265309322_The_Role_of_Time_in_Price_Discovery_Ultra-high_frequency_trading_in_a_Limit_Order_Book_Market en_US
dc.author.affiliation Lebanese American University en_US

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