An Empirical Analysis of the Limit Order Book and the Order Flow in the Paris Bourse

Posted: 17 Oct 1994

See all articles by Bruno Biais

Bruno Biais

Centre for Economic Policy Research (CEPR)

Pierre Hillion

INSEAD - Finance

Chester S. Spatt

Carnegie Mellon University - David A. Tepper School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: July 1994

Abstract

Because the Paris Bourse is a centralized, computerized, limit order market, the dataset it generates is particularly appropriate for studying the interaction between the order book and order flow dynamics. We use descriptive methods to capture the richness of the data and the distinctive aspects of the market structure. We characterize the average order book and order flow. Order flow is concentrated near the quote, while the book is somewhat thinner at the quote than at nearby valuations. We analyze how the order flow is affected by the state of the book and the previous order flow documenting the supply and demand of liquidity in the market. For example, we find that thin books elicit orders and thick books result in trades. We also find evidence of priority effects. For example, investors quickly place orders within the quotes when the depth at the quotes is large or when the spread is large in order to gain price and time priority. Some of our results are also consistent with information effects. For example, a downward (upward) shift in the bid and ask quotes is observed after large sales (purchases).

JEL Classification: G00

Suggested Citation

Biais, Bruno and Hillion, Pierre and Spatt, Chester S., An Empirical Analysis of the Limit Order Book and the Order Flow in the Paris Bourse (July 1994). Available at SSRN: https://ssrn.com/abstract=5586

Bruno Biais

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

Pierre Hillion

INSEAD - Finance ( email )

Boulevard de Constance
F-77305 Fontainebleau Cedex
France
65 799 5388 (Phone)
65 799 5399 (Fax)

Chester S. Spatt (Contact Author)

Carnegie Mellon University - David A. Tepper School of Business ( email )

5000 Forbes Avenue
Pittsburgh, PA 15213-3890
United States
412-268-8834 (Phone)
412-268-6689 (Fax)

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
3,097
PlumX Metrics