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

J. OF FINANCE, Vol. 50 No. 5, December 1995

Posted: 29 Nov 1995

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

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Abstract

As a centralized, computerized, limit order market, the Paris Bourse is particularly appropriate for studying the interaction between the order book and order flow. Descriptive methods capture the richness of the data and distinctive aspects of the market structure. Order flow is concentrated near the quote, while the book is somewhat larger at nearby valuations. We analyze the supply and demand of liquidity. For example, thin books elicit orders and thick books result in trades. To gain price and time priority, investors quickly place orders within the quotes when the depth at the quotes or the spread is large. Consistent with information effects, downward (upward) shifts in both bid and ask quotes occur after large sales (purchases).

JEL Classification: G15

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. J. OF FINANCE, Vol. 50 No. 5, December 1995, Available at SSRN: https://ssrn.com/abstract=6970

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)

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