Search costs and investor trading activity: evidences from limit order book

William Lin, Shih-Chuan Tsai and David Sun

MPRA Paper from University Library of Munich, Germany

Abstract: We analyze in this study investor trading behavior based not on information related assumptions but on the search model of Vayanos and Wang (2007). Our study shows that search cost dictates trading polarization across investors, firm size and time of day. We find that individual investors prefer to trade at market open, while institutional investors trade more heavily near market close. Trading costs indicate that it is less costly for institutional investors to trade large cap stocks at market close than at open. Search cost is related significantly to order-based market liquidity measures depending on time of day, market capitalizations and investor type.

Keywords: Liquidity; search model; limit order book; market depth; execution cost (search for similar items in EconPapers)
JEL-codes: C14 D82 D83 G12 L11 (search for similar items in EconPapers)
Date: 2010-08, Revised 2011-08
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Search Costs and Investor Trading Activity: Evidence from Limit Order Books (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:37284

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