Information Content of Limit Order Book in Tehran Stock Exchange

Subject Areas : Journal of Investment Knowledge

Ahmad Badri ¹ , Mohammad Arab Mazar ² , Massoud Soltanzali ³

1 - دانشیار و عضو هیئت علمی دانشگاه شهید بهشتی
2 - دانشیار و عضو هیئت علمی دانشگاه شهید بهشتی
3 - دانشجوی دکتری مدیریت مالی دانشگاه شهید بهشتی

Received: 2015-10-28 Accepted : 2016-01-19 Published : 2016-06-21

Keywords: limit order book, Information Content, price discovery, information share, High Frequency Data,

Abstract :

Using high frequency data from 33 member companies of the TEFIX30 (about 5 million data), this study examined the information content of limit order book in Tehran Stock Exchange. We try to find that does limit orders behind the best bid and offer provide useful information about stock value? And how much is their information share? We use two well-known methods based on a vector error correction model. Results show that based on Hasbrouck (Gonzalo-Granger) measure, contribution of steps 2 to 10 to price discovery is about 18% (25%) and also contribution of steps 4 to 10 that are not publicly visible is about 8% (10%).

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