Returns, volatility, and liquidity on the ASX
Document Type
Book Chapter
Publisher
John Wiley & Sons Inc
Faculty
Faculty of Business and Law
School
School of Accounting, Finance and Economics
RAS ID
6257
Abstract
This paper investigates the information content of the two types of limit orders on the Australian Stock Exchange ASX: undisclosed orders (ULOs) and limit orders. Given the large order quantity contained in ULOs, we attempt to examine the impact of ULO submissions, cancellations and executions on price changes and volatility over differing intervals within a day. Motivation is generated by the ASX decision to abolish the use of ULOs in favour of iceberg orders. Intraday analysis shows that the impact of both ULO and disclosed order submissions are no longer than one day. ULO buying/selling order submissions at the best bid/ask price increase/decrease returns and price volatility significantly more than disclosed orders. The cancellations of ULOs cause significantly larger price volatility than disclosed limit order cancellations. Compared with disclosed limit order submissions, there is an increase in liquidity from the significantly reduced spread upon DLO submissions.
Comments
Allen, D. E., Cheng, A., Comerton-Forde, C., & Yang, J. (2008). Returns, Volatility, and Liquidity on the ASX. In Francois-Serge Lhabitant, Greg N. Gregoriou (Eds.). Stock Market Liquidity: Implications for Market Microstructure and Asset Pricing (pp. 228-245). New Jersey: John Wiley & Sons Inc.