Information content of the limit order book: A cross-sectional analysis in Borsa Istanbul

Ayşe Çağlayan-Gümüş and Cenk C. Karahan

Global Finance Journal, 2024, vol. 62, issue C

Abstract: This study investigates the contribution of the limit order book to the price discovery process of blue-chip stocks traded on Borsa Istanbul. Using various price series, including the last trade price, best prices of the order book, and price steps beyond the best price levels, we measure the contribution of orders beyond the best prices to price discovery. This contribution is evaluated through information shares. Our findings highlight the significant informational role of the order book in price discovery, emphasizing its importance alongside trading activity for a comprehensive understanding of the market. Additionally, this analysis is conducted across distinct stock characteristics, specifically return, size, volume, and illiquidity, revealing notable variations in the information share of the limit order book.

Keywords: Information share; Limit order book; Market microstructure; Price discovery (search for similar items in EconPapers)
JEL-codes: C32 G12 G14 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:glofin:v:62:y:2024:i:c:s1044028324000929

DOI: 10.1016/j.gfj.2024.101020

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