Journal article · 2020

Do aggressive orders affect liquidity? An evidence from an emerging market

Będowska-Sójka, B.

Research in International Business and Finance, 54, 101307

DOI: 10.1016/j.ribaf.2020.101307

Abstract

This paper investigates how aggressive orders affect spreads and trading activity measures on the stock market. Based on a sample of stocks listed on the Warsaw Stock Exchange this study finds that spreads and trading activity measures increase significantly when aggressive orders are executed, but quickly revert to initial levels. The reaction to these orders on the bid and ask side of the market is similar. The effect of aggressive orders differ depending on the size of the firms. Trading activity measures such as volumes or number of transactions increase stronger for bigger than for smaller stocks, while spreads increase more for smaller firms than for bigger ones. These findings enrich the understanding of liquidity dynamics especially on the emerging markets where liquidity is an important price formation factor.

Keywords: Bid-ask spreads, Aggressive orders, Trading volume, Intraday event study, Order imbalances, Market microstructure

Full text: see the publisher version via DOI.

Research topics: Market liquidity and its measurement

Funding

Cite

@article{ribaf2020_aggressive,
  title = {Do aggressive orders affect liquidity? An evidence from an emerging market},
  author = {Będowska-Sójka, B.},
  year = {2020},
  journal = {Research in International Business and Finance},
  note = {54, 101307},
  doi = {10.1016/j.ribaf.2020.101307}
}