Abstract

http://ssrn.com/abstract=2019537
 
 

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Search Costs and Investor Trading Activity: Evidences from Limit Order Book


William T. LIn


Tamkang University - Banking & Finance

Shih-Chuan Tsai


National Taiwan Normal University

David S. Sun


Kai Nan University

June 15, 2011

Emerging Markets Finance and Trade, Forthcoming

Abstract:     
We analyze in this study investor trading behavior based not on information related assumptions but on the search model of Vayanos and Wang (2007). Our study shows that search cost dictates trading polarization across investors, firm size and time of day. We find that individual investors prefer to trade at market open, while institutional investors trade more heavily near market close. Trading costs indicate that it is less costly for institutional investors to trade large cap stocks at market close than at open. Search cost is related significantly to order-based market liquidity measures depending on time of day, market capitalizations and investor type.

Number of Pages in PDF File: 23

Keywords: Liquidity, search model, limit order book, market depth, execution cost

JEL Classification: C14, D82, D83, G12, L11

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Date posted: March 12, 2012 ; Last revised: April 26, 2013

Suggested Citation

LIn, William T. and Tsai, Shih-Chuan and Sun, David S., Search Costs and Investor Trading Activity: Evidences from Limit Order Book (June 15, 2011). Emerging Markets Finance and Trade, Forthcoming. Available at SSRN: http://ssrn.com/abstract=2019537

Contact Information

William T. LIn
Tamkang University - Banking & Finance ( email )
Department of Banking and Finance
Taiwan, 25137
Taiwan
Shih-Chuan Tsai
National Taiwan Normal University ( email )
162, Hoping East Road, sec. 1
Taipei 106
United States
David S. Sun (Contact Author)
Kai Nan University ( email )
No. 1 Kai Nan Rd.
Lu Ju Township, Taoyuan County, 33857
Taiwan
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