TY  - JOUR
AU  - Biais,Bruno
AU  - Weill,Pierre-Olivier
TI  - Liquidity Shocks and Order Book Dynamics
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 15009
PY  - 2009
Y2  - May 2009
UR  - http://www.nber.org/papers/w15009
L1  - http://www.nber.org/papers/w15009.pdf
N1  - Author contact info:
Bruno Biais
Toulouse School of Economics (CNRS, IDEI)
Manufacture des Tabacs
21, allée de Brienne
31000 TOULOUSE
FRANCE
Tel: fax 33/0561-128637
E-Mail: biais@cict.fr

Pierre-Olivier Weill
Department of Economics
University of California, Los Angeles
Bunche Hall 8283
Los Angeles, CA 90095
Tel: 310/794-6495
Fax: 310/825-9528
E-Mail: poweill@econ.ucla.edu
AB  - We propose a dynamic competitive equilibrium model of limit order trading, based on the premise that investors cannot monitor markets continuously. We study how limit order markets absorb transient liquidity shocks, which occur when a significant fraction of investors lose their willingness and ability to hold assets. We characterize the equilibrium dynamics of market prices, bid-ask spreads, order submissions and cancelations, as well as the volume and limit order book depth they generate.
ER  -