TY - JOUR
T1 - Liquidity supply in electronic markets
AU - Aitken, Michael
AU - Almeida, Niall
AU - Frederick, Frederick H.
AU - McInish, Thomas H.
PY - 2007/5
Y1 - 2007/5
N2 - We examine the supply of liquidity by proprietary trading desks and hedge funds (PTDH) versus mutual funds, index funds, and insurance companies (MII) across ten bid (ask) steps of the limit order book. We document that institutional investors simultaneously supply liquidity at multiple prices in the limit order book. We also find that PTDHs are more price aggressive liquidity suppliers than MIIs, consistent with hypothesized responses to observed changes in the cost and risk of non-execution. We investigate whether these findings are robust to fast versus slow markets, the volatility of daily returns, and aggregate depth relative to daily volume.
AB - We examine the supply of liquidity by proprietary trading desks and hedge funds (PTDH) versus mutual funds, index funds, and insurance companies (MII) across ten bid (ask) steps of the limit order book. We document that institutional investors simultaneously supply liquidity at multiple prices in the limit order book. We also find that PTDHs are more price aggressive liquidity suppliers than MIIs, consistent with hypothesized responses to observed changes in the cost and risk of non-execution. We investigate whether these findings are robust to fast versus slow markets, the volatility of daily returns, and aggregate depth relative to daily volume.
UR - http://www.scopus.com/inward/record.url?scp=34247259423&partnerID=8YFLogxK
U2 - 10.1016/j.finmar.2006.12.001
DO - 10.1016/j.finmar.2006.12.001
M3 - Article
AN - SCOPUS:34247259423
VL - 10
SP - 144
EP - 168
JO - Journal of Financial Markets
JF - Journal of Financial Markets
SN - 1386-4181
IS - 2
ER -