Valenzuela, Marcela, Zer, Ilknur, Fryzlewicz, Piotr 
ORCID: 0000-0002-9676-902X and Rheinlander, Thorsten
(2015)
Relative liquidity and future volatility.
Journal of Financial Markets, 24.
pp. 25-48.
ISSN 1386-4181
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Abstract
The main contribution of this paper is to identify the strong predictive power of the relative, rather than the absolute, volume of orders over volatility. To this end, we propose a new measure, relative liquidity, which accounts for how quoted depth is distributed in a limit order book and captures the level of consensus on a security's trading price. Higher liquidity provision farther away from the best quotes, relative to the rest of the book, is associated with a disagreement on the current price and followed by high volatility. The relationship is robust to the inclusion of several alternative measures.
| Item Type: | Article |
|---|---|
| Official URL: | http://www.sciencedirect.com/science/journal/13864... |
| Additional Information: | © 2015 The Authors |
| Divisions: | Statistics |
| Subjects: | H Social Sciences > HG Finance |
| JEL classification: | G - Financial Economics > G1 - General Financial Markets G - Financial Economics > G2 - Financial Institutions and Services > G20 - General |
| Date Deposited: | 04 Jun 2015 15:04 |
| Last Modified: | 12 Dec 2024 00:54 |
| Projects: | Fondecyt project no. 11140541, Instituto Milenio ICMIS130002 |
| Funders: | Fondecyt, Instituto Milenio |
| URI: | http://eprints.lse.ac.uk/id/eprint/62181 |
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