Price Dynamics and Market Liquidity: An Intraday Event Study on Euronext

44 Pages Posted: 17 Aug 2012 Last revised: 6 Dec 2013

See all articles by Paolo Mazza

Paolo Mazza

IESEG School of Management; LEM CNRS 9221

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

Mazza, Paolo, Price Dynamics and Market Liquidity: An Intraday Event Study on Euronext (December 3, 2013). Available at SSRN: https://ssrn.com/abstract=2130611 or http://dx.doi.org/10.2139/ssrn.2130611

Paolo Mazza (Contact Author)

IESEG School of Management ( email )

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Office: A321
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France

HOME PAGE: http://https://sites.google.com/site/paolomazzaphd/

LEM CNRS 9221 ( email )

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