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Title:Hidden liquidity: Determinants and impact PDF Logo
Authors:Cebiroğlu, Gökhan
Horst, Ulrich
Issue Date:2012
Series/Report no.:SFB 649 discussion paper 2012-023
Abstract:We cross-sectionally analyze the presence of aggregated hidden depth and trade volume in the S&P 500 and identify its key determinants. We find that the spread is the main predictor for a stock's hidden dimension, both in terms of traded and posted liquidity. Our findings moreover suggest that large hidden orders are associated with larger transaction costs, higher price impact and increased volatility. In particular, as large hidden orders fail to attract (latent) liquidity to the market, hidden liquidity provision gives rise to negative liquidity externalities.
Subjects:hidden liquidity
pretrade transparency
iceberg orders
informed trading
market impact
market quality
liquidity externalities
upstairs markets
trade negotiation
JEL:G10
G11
G12
G14
G24
Document Type:Working Paper
Appears in Collections:SFB 649 Discussion Papers, HU Berlin

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