Public Information and Stale Limit Orders: The Evidence

32 Pages Posted: 2 Oct 2012 Last revised: 25 Nov 2014

See all articles by Chris Lamoureux

Chris Lamoureux

University of Arizona - Department of Finance

Qin Emma Wang

Oklahoma State University - Tulsa

Date Written: November 14, 2014

Abstract

In a specialist market public information shocks may generate a sequence of transactions at stale prices, as nimble floor traders pick off obsolete limit orders. We design a test for the importance of public information in price formation around this fact. We find that removing all potentially stale limit order trades from the transactions record has no significant effect on a statistic that links price change to transactions. We use the bootstrap to calibrate this result and demonstrate that public information shocks account for a small portion of stock return variances.

Suggested Citation

Lamoureux, Chris and Wang, Qin Emma, Public Information and Stale Limit Orders: The Evidence (November 14, 2014). Available at SSRN: https://ssrn.com/abstract=2155954 or http://dx.doi.org/10.2139/ssrn.2155954

Chris Lamoureux (Contact Author)

University of Arizona - Department of Finance ( email )

McClelland Hall
P.O. Box 210108
Tucson, AZ 85721-0108
United States
520-621-7488 (Phone)

Qin Emma Wang

Oklahoma State University - Tulsa ( email )

Department of Finance
461 Business Building
Stillwater, OK 74078
United States
918-594-8394 (Phone)
918-594-8281 (Fax)

HOME PAGE: http://business.okstate.edu/directory/694480.html

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