Anonymity and the information content of the limit order book

Huu Nhan Duong, Petko Stefanov Kalev

    Research output: Contribution to journalArticleResearchpeer-review

    1 Citation (Scopus)

    Abstract

    We investigate the effect of broker anonymity on the information content of the limit order book on the Australian Stock Exchange. We argue that the move to anonymity has stronger impact on institutional than individual investors. We document that anonymity increases the informativeness of institutional limit orders about future volatility but has little effect on individual limit orders. Our findings imply that anonymity allows institutional investors to display informative orders in the limit order book. Prices, however, adjust less sufficiently to institutional investors order flow. Overall, anonymity may improve liquidity but it comes at the cost of reduced price efficiency.
    Original languageEnglish
    Pages (from-to)205 - 219
    Number of pages15
    JournalJournal of International Financial Markets, Institutions and Money
    Volume30
    DOIs
    Publication statusPublished - 2014

    Cite this

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    abstract = "We investigate the effect of broker anonymity on the information content of the limit order book on the Australian Stock Exchange. We argue that the move to anonymity has stronger impact on institutional than individual investors. We document that anonymity increases the informativeness of institutional limit orders about future volatility but has little effect on individual limit orders. Our findings imply that anonymity allows institutional investors to display informative orders in the limit order book. Prices, however, adjust less sufficiently to institutional investors order flow. Overall, anonymity may improve liquidity but it comes at the cost of reduced price efficiency.",
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    Anonymity and the information content of the limit order book. / Duong, Huu Nhan; Kalev, Petko Stefanov.

    In: Journal of International Financial Markets, Institutions and Money, Vol. 30, 2014, p. 205 - 219.

    Research output: Contribution to journalArticleResearchpeer-review

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    AB - We investigate the effect of broker anonymity on the information content of the limit order book on the Australian Stock Exchange. We argue that the move to anonymity has stronger impact on institutional than individual investors. We document that anonymity increases the informativeness of institutional limit orders about future volatility but has little effect on individual limit orders. Our findings imply that anonymity allows institutional investors to display informative orders in the limit order book. Prices, however, adjust less sufficiently to institutional investors order flow. Overall, anonymity may improve liquidity but it comes at the cost of reduced price efficiency.

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    DO - 10.1016/j.intfin.2014.02.004

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    JF - Journal of International Financial Markets, Institutions and Money

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