Stylized facts of price gaps in limit order books: Evidence from Chinese stocks

摘要

Price gap, defined as the logarithmic price difference between the first twooccupied price levels on the same side of a limit order book (LOB), is a keydeterminant of market depth, which is one of the dimensions of liquidity.However, the properties of price gaps have not been thoroughly studied due tothe less availability of ultrahigh frequency data. In the paper, we rebuild theLOB dynamics based on the order flow data of 26 A-share stocks traded on theShenzhen Stock Exchange in 2003. Three key empirical statistical properties ofprice gaps are investigated. We find that the distribution of price gaps has apower-law tail for all stocks with an average tail exponent close to 3.2.Applying modern statistical methods, we confirm that the gap time series arelong-range correlated and possess multifractal nature. These three featuresvary from stock to stock and are not universal. Furthermore, we also unveilbuy-sell asymmetry phenomena in the properties of price gaps on the buy andsell sides of the LOBs for individual stocks. These findings deepen ourunderstanding of the dynamics of liquidity of common stocks and can be used tocalibrate agent-based computational financial models.