Journal article
Informed liquidity provision in a limit order market
Abstract
We develop a tractable model of a limit order market where informed and liquidity investors compete with a professional liquidity provider who has a monitoring advantage. We apply our model to study the impact of exogenous transaction costs and investor patience on trading activity and market quality. Without exogenous transaction costs, the relative submission rates of market orders to limit orders, price efficiency, and welfare are invariant …
Authors
Brolley M; Malinova K
Journal
Journal of Financial Markets, Vol. 52, ,
Publisher
Elsevier
Publication Date
January 2021
DOI
10.1016/j.finmar.2020.100566
ISSN
1386-4181