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Do aggressive orders affect liquidity? An evidence from an emerging market

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  • Będowska-Sójka, Barbara

Abstract

This paper investigates how aggressive orders affect spreads and trading activity measures on the stock market. Based on a sample of stocks listed on the Warsaw Stock Exchange this study finds that spreads and trading activity measures increase significantly when aggressive orders are executed, but quickly revert to initial levels. The reaction to these orders on the bid and ask side of the market is similar. The effect of aggressive orders differ depending on the size of the firms. Trading activity measures such as volumes or number of transactions increase stronger for bigger than for smaller stocks, while spreads increase more for smaller firms than for bigger ones. These findings enrich the understanding of liquidity dynamics especially on the emerging markets where liquidity is an important price formation factor.

Suggested Citation

  • Będowska-Sójka, Barbara, 2020. "Do aggressive orders affect liquidity? An evidence from an emerging market," Research in International Business and Finance, Elsevier, vol. 54(C).
    • Handle: RePEc:eee:riibaf:v:54:y:2020:i:c:s0275531920303780
    DOI: 10.1016/j.ribaf.2020.101307
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