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The Information Content of an Open Limit-order Book in Tehran Stock Exchange

Biria, Mohammad Reza | 2016

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  1. Type of Document: M.Sc. Thesis
  2. Language: Farsi
  3. Document No: 48861 (44)
  4. University: Sharif University of Technology
  5. Department: Management and Economics
  6. Advisor(s): Zamani, Shiva; Ebrahimnezhad, Ali
  7. Abstract:
  8. Pre-trade transparency and price discovery is one of the principal functions of financial markets. When the price of a certain asset is specified, sales process begins. With more pre-trade transparency that helps to process of price discovery, Investors trade more safely and thus this cause higher liquidity. One of the tools that helps to increase transparency and price discovery in financial markets is open limited order book. In this study, we deal with the limit order book in Tehran Stock Exchange (TSE) and try to answer the question Whether the information in the limit order book has the predictive power of future short-term returns of stocks in Tehran Stock Exchange and does it help to price discovery? In TSE three levels of limit order book are available to the public for free and five levels to the brokers. Results of this research shows that limit order book in TSE contains information about movements of future short-term returns. Also shows that public disclosure of limit order book from three to five levels can be useful in Tehran Stock Exchange could be useful and help traders in increasing transparency and price discovery but with increasing number of levels, predictive power of new levels will decrease
  9. Keywords:
  10. Tehran Stock Exchange ; Limit Order Book ; Price Discovery ; Pre-Trade Transparency ; Future Short-Term Returns ; Information Content

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