Abstract:
This paper examines transactions costs in buying versus selling
using a large database of snapshots of the limit order book. On the
equity spot market, there is clear evidence of asymmetry in liquidity:
transactions costs are lower for buy market orders when compared
with sell market orders. In the identical setting, trading in single stock
futures is also observed, and there is little evidence of asymmetry.
This suggests that asymmetry in liquidity may be driven by short
sales restrictions which are present on the spot market but not on the
single stock futures market.
