Liquidity Shocks and Order Book Dynamics

Bruno Biais and Pierre-Olivier Weill

No 15009, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We propose a dynamic competitive equilibrium model of limit order trading, based on the premise that investors cannot monitor markets continuously. We study how limit order markets absorb transient liquidity shocks, which occur when a significant fraction of investors lose their willingness and ability to hold assets. We characterize the equilibrium dynamics of market prices, bid-ask spreads, order submissions and cancelations, as well as the volume and limit order book depth they generate.

JEL-codes: G12 (search for similar items in EconPapers)
Date: 2009-05
New Economics Papers: this item is included in nep-cta, nep-dge and nep-mst
Note: AP
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Citations: View citations in EconPapers (13)

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Related works:
Working Paper: Liquidity Shocks and Order Book Dynamics (2009)
Working Paper: Liquidity shocks and order book dynamics (2009)
Working Paper: Liquidity Shocks and Order Book Dynamics (2009)
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