Bid- and Ask-Side Liquidity in the NYSE Limit Order Book

60 Pages Posted: 2 Jun 2016 Last revised: 30 Jul 2019

See all articles by Tolga Cenesizoglu

Tolga Cenesizoglu

HEC Montreal - Department of Finance

Gunnar Grass

HEC Montréal

Date Written: April 28, 2016

Abstract

We disentangle bid- and ask-side liquidity using 11 years of comprehensive NYSE limit order book data and document that this has important implications for understanding the determinants, commonalities and pricing of liquidity. First, the ask- but not bid-side liquidity of financial stocks deteriorates during the 2008 short selling ban. Second, bid-side (ask-side) liquidity decreases (increases) in lagged short- and long-term returns, indicating persistent contrarian behavior in limit orders. Third, liquidity commonality increases during the financial crisis, more so on the bid than on the ask side. Finally, ask- but not bid-side illiquidity predicts daily returns, while both forecast monthly returns.

Keywords: Market Liquidity, Limit Order Book, Financial Crisis, Short Selling Ban, Asset Pricing

JEL Classification: G12

Suggested Citation

Cenesizoglu, Tolga and Grass, Gunnar, Bid- and Ask-Side Liquidity in the NYSE Limit Order Book (April 28, 2016). Available at SSRN: https://ssrn.com/abstract=2788349 or http://dx.doi.org/10.2139/ssrn.2788349

Tolga Cenesizoglu

HEC Montreal - Department of Finance ( email )

3000 Chemin de la Cote-Sainte-Catherine
Montreal, Quebec H3T 2A7
Canada

HOME PAGE: http://www.hec.ca/en/profs/tolga.cenesizoglu.html

Gunnar Grass (Contact Author)

HEC Montréal ( email )

3000, Chemin de la Côte-Sainte-Catherine
Montreal, Quebec H3T2A7
Canada
5143401540 (Phone)

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