The costs and determinants of order aggressiveness

Mark D Griffiths, Brian F Smith, D.Alasdair S Turnbull, Robert W White
2000 Journal of Financial Economics  
This paper examines the costs and determinants of order aggressiveness. Aggressive orders have larger price impacts but smaller opportunity costs than passive orders. Price impacts are ampli"ed by large orders, small "rms, and volatile stock prices. To minimize the implementation shortfall, the optimal strategy is to enter buy (sell) orders at the bid (ask). Aggressive buy (sell) orders tend to follow other aggressive buy (sell) orders and occur when bid}ask spreads are narrow and depth on the
more » ... ame (opposite) side of the limit book is large (small). Aggressive buys are more likely than sells to be motivated by information. 2000 Elsevier Science S.A. All rights reserved. JEL classixcation: G15; G24 Keywords: Price impact; Limit orders 0304-405X/00/$ -see front matter 2000 Elsevier Science S.A. All rights reserved. PII: S 0 3 0 4 -4 0 5 X ( 9 9 ) 0 0 0 5 9 -8
doi:10.1016/s0304-405x(99)00059-8 fatcat:nfbcq2wh3vfgjkhobmbtdwwyai