 Does the open limit order book matter in explaining informational volatility?Roberto Pascual and David Veredas ULB Institutional Repository from ULB -- Universite Libre de Bruxelles Abstract: We evaluate the informational content of the open limit order book by studying its role in explaining the volatility of the efficient price. We separate transitory (liquidity-driven) volatility from informational (efficient price-related) volatility using a dynamic state-space co-integration model for ask and bid quotes. Consistently with Foucault, Moinas, and Theissen (2007, Review of Financial Studies), we show that for any given trade size, the higher the roundtrip costs, the higher the ex post informational volatility. Other pieces of the LOB, such as quoted depth, both at and away from the best quotes, and the book imbalance, are also informative. © The Author 2009. Published by Oxford University Press. All rights reserved. For Permissions, please e-mail: journals.permissions@oupjournals.org. Keywords: Limit order book; Market microstructure; Order-drivenmarkets; Price formation; State-space models; Volatility (search for similar items in EconPapers) Published in: Journal of financial econometrics (2009) v.8 n° 1,p.57-87 There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it. Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:ulb:ulbeco:2013/183777 Ordering information: This working paper can be ordered from Access Statistics for this paper More papers in ULB Institutional Repository from ULB -- Universite Libre de Bruxelles Contact information at EDIRC. |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.