Quotation Kopp, Emanuel Albin, Hütl, Michael, Loistl, Otto, Prix, Johannes. 2008. Systematic Liquidity in the Xetra Order Book: A Multi-Stage Approach. EFMA 2008 Annual Meeting, European Financial Management Association (EFMA), Athen, Griechenland, 25.06.-28.06..




The latest developments in the literature on market-wide liquidity are the investigation of order-driven market structures, the application of higher data frequencies, and there is also a shift towards a demand/supply perspective of liquidity. Butmost existing studies concentrate exclusively on liquidity around the spread, which represents only a small area of the liquidity provided by limit orders in the order book. We apply liquidity measures that capture different non-overlapping tradability aspects of liquidity in the entire limit order book. Since conventional PCA methods can be strongly affected by the presence of outliers in the sample, we rely on a robust principal component analysis method based on the Projection-Pursuit principle (Huber (1985)) to estimate the systematic liquidity components. Moreover, a PCAmethodology allows no economic interpretation of the systematic factors. Thereforewe propose amulti-stage PCAand regression approach that allows a more detailed investigation of cross-sectional liquidity determinants and their interactions. Additionally, we apply several other trading-related measures that allow to capture information from the (entire) limit order book, and study the relation of their market-wide factors to systematic factors in liquidity. This is the first empirical study on non-idiosyncratic liquidity components that investigates different time periods during the trading session based on complete tick-by-tick order book data from the Xetra trading system.


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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Paper presented at an academic conference or symposium
Language English
Title Systematic Liquidity in the Xetra Order Book: A Multi-Stage Approach
Event EFMA 2008 Annual Meeting, European Financial Management Association (EFMA)
Year 2008
Date 25.06.-28.06.
Country Greece
Location Athen
URL http://www.aislab.aueb.gr/efma2008/


Kopp, Emanuel Albin (Former researcher)
Hütl, Michael (Former researcher)
Loistl, Otto (Details)
Prix, Johannes (Former researcher)
Institute for Investmentbanking and Catallactics IN (Former organization)
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