EconStor >
Universität zu Köln >
Centre for Financial Research (CFR), Universität Köln >
CFR Working Papers, Centre for Financial Research (CFR), Universität Köln >

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10419/57710
  

Full metadata record

DC FieldValueLanguage
dc.contributor.authorFoucault, Thierryen_US
dc.contributor.authorMoinas, Sophieen_US
dc.contributor.authorTheissen, Eriken_US
dc.date.accessioned2012-04-25en_US
dc.date.accessioned2012-05-02T15:44:16Z-
dc.date.available2012-05-02T15:44:16Z-
dc.date.issued2005en_US
dc.identifier.urihttp://hdl.handle.net/10419/57710-
dc.description.abstractAs of April 23, 2001, the limit order book for stocks listed on Euronext Paris became anonymous. We study the effect of this switch to anonymity on market liquidity and the informational content of the limit order book. Our empirical analysis is based on a model of limit order trading in which traders have information on future price volatility. As limit orders have option-like features, this information is valuable for limit order traders. We analyze limit order traders' bidding strategies in 2 different market structures : (a) an anonymous market (limit order traders' IDs are concealed) and (b) a non-anonymous market (traders' IDs are disclosed). Limit order traders bid less aggressively when they expect volatility to rise. For this reason, in either market design, an increase in the bid-ask spread foreshadows increased volatility. Moreover, when information on future volatility is public, the informational content of the bid-ask spread and market liquidity are identical in each market structure. In contrast, when some traders possess superior information on future volatility, a switch to anonymity alters the informational content of the bid-ask spread and market liquidity. For our sample stocks, we find that the switch to anonymity in Euronext paris has significantly reduced the average quoted spread and the average effective spread. We also find that the size of the bid-ask spread is positively related the magnitude of future price movements. But the strength of this association is weaker after the switch to anonymity. Overall, the empirical findings are consistent with the version of our model in which traders possess private information about future volatility.en_US
dc.language.isoengen_US
dc.publisherCentre for Financial Research Cologneen_US
dc.relation.ispartofseriesCFR Working Paper 05-15en_US
dc.subject.jelG10en_US
dc.subject.jelG14en_US
dc.subject.jelG24en_US
dc.subject.ddc330en_US
dc.subject.keywordMarket Microstructureen_US
dc.subject.keywordLimit Order Tradingen_US
dc.subject.keywordAnonymityen_US
dc.subject.keywordTransparencyen_US
dc.subject.keywordLiquidityen_US
dc.subject.keywordVolatility Forecastsen_US
dc.titleDoes anonymity matter in electronic limit order markets?en_US
dc.typeWorking Paperen_US
dc.identifier.ppn699925355en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen_US
dc.identifier.repecRePEc:zbw:cfrwps:0515-
Appears in Collections:CFR Working Papers, Centre for Financial Research (CFR), Universität Köln

Files in This Item:
File Description SizeFormat
699925355.pdf835.23 kBAdobe PDF
No. of Downloads: Counter Stats
Show simple item record
Download bibliographical data as: BibTeX

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.