Latest / Weekly Working Paper Digest - Market Micro Structure/Retail Trading
Deep Dive: Price Improvement and Price Discovery on a Primary Market
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Price improvement on the American Stock Exchange is not random but selectively granted based on market direction, serving as a mechanism for price discovery. Buy orders receive significantly more improvement when prices are falling, while sell orders receive more when prices are rising, indicating that specialists use price improvement to incorporate their private views on short-term price movements. The effect is substantial: for non-system orders, average improvement for buyers is nearly…
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