Revisiting the stealth trading hypothesis: does time-varying liquidity explain the size-effect?
- Large trades have a smaller price impact per share than medium-sized trades. So far, the literature has attributed this effect to the informational content of trades. In this paper, we show that this effect can arise from strategic order placement. We introduce the concept of a liquidity elasticity, measuring the responsiveness of liquidity demand with respect to changes in liquidity supply, as a major driver for a declining price impact per share. Empirical evidence based on Nasdaq stocks strongly supports theoretical predictions and shows that the aspect of liquidity coordination is an important complement to rationales based on asymmetric information.
| Author: | Gökhan CebirogluGND, Nikolaus HautschORCiDGND, Christopher Walsh |
|---|---|
| URN: | urn:nbn:de:hebis:30:3-509904 |
| URL: | https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3446394 |
| Parent Title (English): | Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 625 |
| Series (Serial Number): | CFS working paper series (625) |
| Publisher: | Center for Financial Studies |
| Place of publication: | Frankfurt, M. |
| Document Type: | Working Paper |
| Language: | English |
| Year of Completion: | 2019 |
| Year of first Publication: | 2019 |
| Publishing Institution: | Universitätsbibliothek Johann Christian Senckenberg |
| Release Date: | 2019/09/03 |
| Tag: | limit order book; liquidity elasticity; price impact; stealth trading |
| Issue: | July 18, 2019 |
| Page Number: | 58 |
| HeBIS-PPN: | 45374205X |
| Institutes: | Wirtschaftswissenschaften / Wirtschaftswissenschaften |
| Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS) | |
| Dewey Decimal Classification: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
| Sammlungen: | Universitätspublikationen |
| Licence (German): |  Deutsches Urheberrecht |
