Limit-Order Submission Strategies under Asymmetric Information

By Lukas Menkhoff, Carol L. Osler, Maik Schmeling. Social Science Research Network, 2010

127 citations recorded by the source corpus.

This paper provides evidence that informed traders dominate the response of limit-order submissions to shocks in a pure limit-order market. In the market we study, informed traders are highly sensitive to spreads, volatility, momentum and depth. By contrast, uninformed traders are relatively insensitive to all these market conditions. The dominance of the informed over limit-order submissions is magnified by contrasts between them and the uninformed in the use of aggressively-priced limit orders.

Subfields: Economics and Econometrics, Finance, Management Science and Operations Research

View Paper: https://www.semanticscholar.org/paper/f1deb0058cf01013cf06cf42b3cd5c3729aa65dc