Order Imbalance and Liquidity Supply
Author | : Mingsheng Li |
Publisher | : |
Total Pages | : 36 |
Release | : 2006 |
ISBN-10 | : OCLC:1291218202 |
ISBN-13 | : |
Rating | : 4/5 (02 Downloads) |
Download or read book Order Imbalance and Liquidity Supply written by Mingsheng Li and published by . This book was released on 2006 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this study we analyze the effect of order imbalance on the quotation behavior of Nasdaq market makers. We find that Nasdaq market makers use both price and quantity quotes when dealing with order imbalances. However, order imbalance affects only price movement, not spreads. We also find that Nasdaq market makers quote more shares and compete more intensively on bid-side (ask-side) when public sells (buys) exceed public buys (sells). These suggest that market makers increase liquidity supply when order imbalances exist. More interestingly, we show that both market conditions and price movements affect investors' trading behavior.