Liquidity Trading On Stock Markets: Determinants Of The Humped Shape Of The Order Book
نویسندگان
چکیده
In this paper we examine pure limit order markets in order to find out how different trading strategies affect the shape of the order book. We concentrate on liquidity trading, which implies that any new information that would influence the fundamental value of the traded asset is excluded. The humped shape of the order book is a stylized fact studied in the literature. We build a simulation model to explain the position of this hump in a setting where liquidity takers and providers submit buy and sell orders to complete their exogenous trading needs. We show that under the above assumptions the exogenous impatience factor of liquidity traders determines the position of the hump.
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