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Please use this identifier to cite or link to this item:
http://hdl.handle.net/2451/26473
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| Title: | The “Make or Take” Decision in an Electronic Market:
Evidence on the Evolution of Liquidity |
| Authors: | Bloomfield, Robert
O’Hara, Maureen
Saar, Gideon |
| Issue Date: | Aug-2002 |
| Series/Report no.: | FIN-02-029 |
| Abstract: | This paper uses experimental asset markets to investigate the evolution
of liquidity in an electronic limit order market. Our market setting
includes salient features of electronic markets, as well as informed
traders and liquidity traders. We focus on the strategies of the
traders, and how these are affected by trader type, characteristics of
the market, and characteristics of the asset. We find that informed
traders use more limit orders than do liquidity traders. We also find
that liquidity provision shifts over time, with informed traders
increasingly providing liquidity in markets. This evolution is
consistent with the risk advantage informed traders have in placing
limit orders. Thus, a market making role emerges endogenously in our
electronic markets. |
| URI: | http://hdl.handle.net/2451/26473 |
| Appears in Collections: | Finance Working Papers
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