Intraday Liquidity Costs: An Examination of Order Execution Quality on Nasdaq

摘要

When market liquidity imperfections exist, liquidity costs will arise. Our study examines the intraday time dependent patterns of liquidity costs in Nasdaq stocks. Using unique order level data as measures for liquidity costs, we find that orders submitted midday take significantly longer to execute than orders submitted around the open and close. However, midday orders execute with less price variation, fewer trades, and higher fill rates. The time-price tradeo?of order execution coincides with the U-shape patterns of market volume and volatility. While traders are more likely to trade around the open and close, these times exhibit a higher proba- bility of minimizing overall liquidity costs.