Choice of Order Size and Price Discovery: The Last Digit Puzzle

96 Pages Posted: 19 Mar 2016 Last revised: 13 May 2017

See all articles by Rene Wells

Rene Wells

School of Business, MacEwan University

Date Written: April 11, 2017


I claim that uninformed traders prefer ending the size of their orders with a zero (e.g. 110 shares) but it is not the case for informed traders, creating an information channel and providing a signal. I propose the Last Digit Hypothesis (LDH): i) some traders exhibit a last digit preference for the digit 0 and other traders do not while ii) the latter are better able to trade on information than the former. The LDH predicts that a trade arising from a marketable order with a size ending with a 0 on average contributes less to price discovery than other trades. My empirical findings support the LDH. However, the LDH is not an equilibrium since informed traders have an incentive to mimic the preferences of uninformed traders to avoid detection and face little constraints or costs to do so. It is puzzling that I find no evidence of such mimicking. I offer plausible explanations for this finding.

Keywords: price discovery, digit preference, order size, informed trading, market microstructure, regulations

JEL Classification: G02; G10; G14; G15; G18

Suggested Citation

Wells, Rene, Choice of Order Size and Price Discovery: The Last Digit Puzzle (April 11, 2017). Available at SSRN: or

Rene Wells (Contact Author)

School of Business, MacEwan University ( email )

88 Crestridge View Sw
Calgary, Alberta T3B 1G8
(403) 613-0323 (Phone)


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