Price Clustering: Evidence Using Comprehensive Limit‐Order Data

Financial Review - Tập 44 Số 1 - Trang 1-29 - 2009
Chaoshin Chiao1, May D. Wang1
1National Dong Hwa University

Tóm tắt

AbstractEmploying comprehensive limit‐order data which identify investor types, this paper examines the clustering pattern of limit‐order prices. First, limit orders, particularly those submitted by individual investors (IIs), tend to cluster at integer and even prices. Second, nonmarketable limit‐order prices cluster more than marketable limit‐order prices, indicating that aggressive limit orders generally embed more information. Third, investors choosing even‐priced limit orders are not penalized by lower execution ratios. Fourth, investors (particularly IIs) strategically exhibit front‐running behavior. Fifth, price clustering indeed creates price barriers. Finally, the degree of price clustering using trade data is significantly underestimated, compared to that using limit‐order data.

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Financial Review

Tập 44 Số 1

1-29

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