An analysis of depth behavior in an electronic, order-driven environment

被引:39
作者
Brockman, P [1 ]
Chung, DY [1 ]
机构
[1] Hong Kong Polytech Univ, Fac Business & Informat Syst, Dept Accountancy, Hong Kong, Peoples R China
关键词
liquidity; depths; order-driven; stock exchange of Hong Kong;
D O I
10.1016/S0378-4266(99)00044-8
中图分类号
F8 [财政、金融];
学科分类号
0202 ;
摘要
The purpose of this study is to investigate inter-temporal and cross-sectional depth patterns in an electronic, order-driven environment. Although many exchanges operate in this environment, little is known about the liquidity dynamics induced by such trading mechanisms. The findings, based on over six million observations, reveal an inverted U-shaped pattern that mirrors the commonly reported U-shaped spread pattern. An important implication is that earlier spread results understate the strength of inter-temporal liquidity variations. Cross-sectional analysis, based on adverse selection-sorted portfolios, demonstrates that corporate depth is negatively related to information asymmetry. The adverse selection impact on liquidity and cost of capital is stronger than previously believed since information costs are realized through both spreads and depths. (C) 1999 Elsevier Science B.V. All rights reserved.
引用
收藏
页码:1861 / 1886
页数:26
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