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Journal of Financial Economics Vol. 56 No. 1 2000

The costs and determinants of order aggressiveness

Mark D. Griffiths1; Brian F. Smith2; D. Alasdair S. Turnbull3; Robert W. White4

1 Thunderbrid, The American Graduate School of International Management, World Business, 15249 N. 59th Avenue, Glendale, AZ 85306-3399, USA · 2 Wilfrid Laurier University · 3 Pepperdine University · 4 Western University

Abstract

This paper examines the costs and determinants of order aggressiveness. Aggressive orders have larger price impacts but smaller opportunity costs than passive orders. Price impacts are amplified by large orders, small firms, and volatile stock prices. To minimize the implementation shortfall, the optimal strategy is to enter buy (sell) orders at the bid (ask). Aggressive buy (sell) orders tend to follow other aggressive buy (sell) orders and occur when bid–ask spreads are narrow and depth on the same (opposite) side of the limit book is large (small). Aggressive buys are more likely than sells to be motivated by information.

DOI
10.1016/s0304-405x(99)00059-8
Volume
56
Issue
1
Pages
65-88
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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