Journal of Financial and Quantitative Analysis Vol. 44 No. 1 2009
Detecting Liquidity Traders
open access
Abstract
We develop a measure (based on the relative slopes of the demand and supply schedules) quantifying the asymmetric presence of liquidity traders in the market: a steeper slope of the demand (supply) schedule indicates a concentration of liquidity traders on the demand (supply) side. Using the opening session of the Tel Aviv Stock Exchange, we demonstrate the predictive power of our measure. Consistent with theory, we find that the concentration of liquidity traders on the demand (supply) side is negatively (positively) correlated with future returns. We find that liquidity traders are likely to arrive at the market together (commonality).
- DOI
- 10.1017/s0022109009090085
- Volume
- 44
- Issue
- 1
- Pages
- 29-54
- Language
- en
- Sources
- bibtex:phds-export.bib crossref openalex