Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/203251
Authors: 
Cebiroglu, Gökhan
Hautsch, Nikolaus
Walsh, Christopher
Year of Publication: 
2019
Series/Report no.: 
CFS Working Paper Series 625
Abstract: 
Large trades have a smaller price impact per share than medium-sized trades. So far, the literature has attributed this effect to the informational content of trades. In this paper, we show that this effect can arise from strategic order placement. We introduce the concept of a liquidity elasticity, measuring the responsiveness of liquidity demand with respect to changes in liquidity supply, as a major driver for a declining price impact per share. Empirical evidence based on Nasdaq stocks strongly supports theoretical predictions and shows that the aspect of liquidity coor- dination is an important complement to rationales based on asymmetric information.
Subjects: 
stealth trading
price impact
liquidity elasticity
limit order book
JEL: 
G02
G10
G23
Document Type: 
Working Paper
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