Price Dynamics and Market Liquidity: An Intraday Event Study on Euronext
44 Pages Posted: 17 Aug 2012 Last revised: 6 Dec 2013
Date Written: December 3, 2013
Abstract
In this paper, we determine whether intraday price dynamics observed on Euronext help characterize market liquidity in real time. We generate 15-minute price movement configurations based on High-Low-Open-Close (HLOC) patterns and measure liquidity in terms of spread, depth, order imbalance, dispersion and slope. We also consider trading activity and volatility measures. Based on an event study methodology, we find that particular HLOC configurations are associated with higher liquidity in the limit order book. Although these effects are short-lived, market participants could benefit from temporary higher liquidity by executing their trades when these price configurations occur.
Keywords: Liquidity, Limit order market, Informed trading, Market microstructure, HLOC dynamics
JEL Classification: G10, G14
Suggested Citation: Suggested Citation
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