Limit orders and the bid–ask spread

Executives' horizon, internal governance and stock market liquidity

“…Consistent with previous studies, we also find that liquidity is significantly and positively related to closing price, asset tangibility, return volatility, and dollar volume (Chung et al, 1999;McInish and Wood, 1992;Stoll, 2000). We also find that liquidity is negatively related to R&D expenditures, volatility, and dividends.…”

“…Previous studies show that a significant portion of cross-sectional and time-series variation in liquidity can be explained by select stock attributes (see Chung et al, 1999;McInish and Wood, 1992;Stoll, 2000). To isolate the effect of internal governance on liquidity, we control for stocks' average daily closing price (in logarithm), return volatility, dollar trading volume (in logarithm), and dividend per share.…”

Disclosure Policy and Market Liquidity: Impact of Depth Quotes and Order Sizes*

“…Thus, their models do not address an institutional feature, competition among market makers, critical to our empirical analyses. Research (Chung, Van Ness, and Van Ness 1999;Kavajecz 1999) suggests that limit-order traders compete with specialists to supply liquidity, and that limit-order quantities comprise a significant portion of the quoted depth in New York Stock Exchange/ American Stock Exchange (NYSE/AMEX) data. Thus, our data (depth at the best quoted price) reflect the aggregation of depth provided by specialists and by limitorder traders.…”

“…Several papers (including Van Ness, Van Ness, andPruitt 2000;Goldstein and Kavajecz 1998;and Bacidore 1997) find that depths (and spreads) fall in response to minimum tick-size reductions and attribute the decline to lower market-making profits. As we explain in section 2, although New York and American stock exchange trades (our data source) are routed through a single specialist, limit-order traders compete with exchange specialists to supply market-making services, and they constitute a significant portion of quoted depth (Chung, Van Ness, and Van Ness 1999). 3.…”

Liquidity Provision of Limit Order Trading in the Futures Market Under Bull and Bear Markets

“…When examining the liquidity provision of limit orders on the NYSE, Kavajecz (1999) revealed that limit order traders reduce the market depth to achieve two goals: avoiding the adverse selection problems related to information uncertainty and mitigating uncertainty during volatile trading periods. Extending the work of Kavajecz (1999), Chung et al (1999) examined limit orders on the NYSE and found that limit orders increase as asset volatility and transaction volume increase. In analysis of another purely order‐driven market, namely the Stock Exchange of Hong Kong (SEHK), Ahn et al (2001) found that market depth increases following a rise in transient volatility.…”