Limit Order Books and Trade Informativeness

Trade informativeness and liquidity in Bitcoin markets

“…Compared with the current study, both [ 14 , 18 ] fit relatively small datasets, and estimated the transaction cost γ to be significantly negative, and the fit statistics were poor. The small sample size is of special concern in GMM estimation, since GMM estimators tend to be strongly biased for small samples.…”

“…The following table ( Table 4 ) compares the estimators from this research to empirically fit the [ 5 ] model to data, to corresponding estimators from the two prior studies that attempted empirical fit in [ 14 , 18 ].…”

“…By the end of the decade, though [ 14 ], was able to test [ 5 ] using limited data from the Stockholm Stock Exchange; ultimately rejecting a model yielding counter-intuitive estimators; e.g., the SSE data transaction costs were estimated to be negative. [ 18 ] fit Glosten’s model to data from the thirty German DAX stocks using generalized method of moments (GMM) estimators, rejecting Glosten’s model in 29 out of the 30 German DAX stocks.…”

“…The current research overcame limitations of these two prior tests of Glosten’s model by massively increasing the size of the dataset, and concentrating on one significant, highly liquid cryptocurrency asset: Bitcoin, which accounts for over half of the cryptocurrency markets capitalization. [ 18 ] observed that SSE market structure is substantially at variance with Glosten’s assumptions The DAX 30, in turn, are traded markets subject to Germany’s very lax enforcement of insider trading; traditionally in both German Corporation and Stock Exchange Law there have been no provisions against insider trading. German stocks may also have large ownership shares controlled by labor unions and wealthy families, which further distorts trading behavior.…”

“…[ 18 ] produced some very strange values of α and γ in their study, leading one to question whether their dataset actually represented an efficient market. Their research implies that for a vigorously traded cryptocurrency such as Bitcoin, market orders should be relatively uninformative.…”