Anonymity and the Information Content of the Limit Order Book

36 Pages Posted: 29 May 2014

See all articles by Huu Nhan Duong

Huu Nhan Duong

Monash University - Department of Banking and Finance; Financial Research Network (FIRN)

Petko S. Kalev

La Trobe Business School

Date Written: May 27, 2014

Abstract

We investigate the effect of broker anonymity on the information content of the limit order book on the Australian Stock Exchange. We argue that the move to anonymity has stronger impact on institutional than individual investors. We document that anonymity increases the informativeness of institutional limit orders about future volatility but has little effect on individual limit orders. Our findings imply that anonymity allows institutional investors to display informative orders in the limit order book. Prices, however, adjust less sufficiently to institutional investors’ order flow. Overall, anonymity may improve liquidity but it comes at the cost of reduced price efficiency.

JEL Classification: C35; G15; G25; G29

Suggested Citation

Duong, Huu Nhan and Kalev, Petko S., Anonymity and the Information Content of the Limit Order Book (May 27, 2014). Journal of International Financial Markets, Institutions and Money, Vol. 30, 2014, Available at SSRN: https://ssrn.com/abstract=2442651

Huu Nhan Duong (Contact Author)

Monash University - Department of Banking and Finance ( email )

Melbourne
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Petko S. Kalev

La Trobe Business School ( email )

Department of Economics and Finance
Donald Whitehead Building: Level 3, DWB313
Bundoora, Victoria 3086
Australia
+613 9479 6285 (Phone)
+613 9479 1654 (Fax)

HOME PAGE: http://www.latrobe.edu.au/business/about/staff/profile?uname=PKalev

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