Powered by OpenAIRE graph
Found an issue? Give us feedback
addClaim

Limit Order Book Liquidity and Liquidity Imbalance

Authors: Wee Yong Yeo;

Limit Order Book Liquidity and Liquidity Imbalance

Abstract

We analyze the role of liquidity provision of limit order traders in the NYSE. Using an extensive limit order book data for all the ordinary stocks in the NYSE, we compute various measures of liquidity and imbalance in liquidity. We show that the interest rate environment has a strong impact on the willingness of limit order traders to provide liquidity. Higher cost of financing the provision of liquidity reduces the liquidity in the limit order book. Limit order traders are also more willing to provide liquidity earlier in the week than later. Imbalance between buy side and sell side liquidity exhibit high autocorrelation. Higher buy side liquidity increases daily market returns in the same period. Both contemporaneous and lag daily market returns have a positive impact on the imbalance of the liquidity in the limit order book. However, we find that on an intraday basis, higher sell side liquidity in the pervious period increases returns in the current period, and higher intraday contemporaneous returns increase sell side liquidity more than buy side liquidity. This may be indicative of the market stabilizing role that limit order traders play.

Related Organizations
  • BIP!
    Impact byBIP!
    selected citations
    These citations are derived from selected sources.
    This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
    0
    popularity
    This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.
    Average
    influence
    This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
    Average
    impulse
    This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
    Average
Powered by OpenAIRE graph
Found an issue? Give us feedback
selected citations
These citations are derived from selected sources.
This is an alternative to the "Influence" indicator, which also reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Citations provided by BIP!
popularity
This indicator reflects the "current" impact/attention (the "hype") of an article in the research community at large, based on the underlying citation network.
BIP!Popularity provided by BIP!
influence
This indicator reflects the overall/total impact of an article in the research community at large, based on the underlying citation network (diachronically).
BIP!Influence provided by BIP!
impulse
This indicator reflects the initial momentum of an article directly after its publication, based on the underlying citation network.
BIP!Impulse provided by BIP!
0
Average
Average
Average
Upload OA version
Are you the author of this publication? Upload your Open Access version to Zenodo!
It’s fast and easy, just two clicks!