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Limit-Order Submission Strategies under Asymmetric InformationLukas MenkhoffLeibniz Universitaet Hannover - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research) Carol L. OslerBrandeis University - International Business School Maik SchmelingCity University London - Sir John Cass Business School May 2010 CESifo Working Paper Series No. 3054 Abstract: This paper provides evidence that informed traders dominate the response of limit-order submissions to shocks in a pure limit-order market. In the market we study, informed traders are highly sensitive to spreads, volatility, momentum and depth. By contrast, uninformed traders are relatively insensitive to all these market conditions. The dominance of the informed over limit-order submissions is magnified by contrasts between them and the uninformed in the use of aggressively-priced limit orders.
Number of Pages in PDF File: 42 Keywords: limit-order market, order submission, informed traders, market conditions JEL Classification: G20 working papers seriesDate posted: May 19, 2010Suggested CitationContact Information
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