Liquidity and Information in Order Driven Markets

@inproceedings{Rou2008LiquidityAI,
  title={Liquidity and Information in Order Driven Markets},
  author={Ioanid Roşu},
  year={2008}
}
  • Ioanid Roşu
  • Published 2008
This paper analyzes the interaction between liquidity traders and informed traders in a dynamic model of an order-driven market. Agents freely choose between limit and market orders by trading off execution price and waiting costs. In equilibrium, informed patient traders generally submit limit orders, except when their privately observed fundamental value of the asset is far away from the current market-inferred value, in which case they become impatient and submit a market order. As a result… CONTINUE READING