Search costs and investor trading activity: Evidence from limit order books

William Lin*, Shih Chuan Tsai, David Sun

*Corresponding author for this work

Research output: Contribution to journalReview articlepeer-review

6 Citations (Scopus)


In this study, we analyze investor trading behavior based not on information-related assumptions but on the search model of Vayanos and Wang (2007). Our study shows that search cost dictates trading polarization across investors, firm size, and time of day. We find that individual investors prefer to trade at market open, while institutional investors trade more heavily near market close. Trading costs indicate that it is less costly for institutional investors to trade large cap stocks at market close than at open. Search cost is related significantly to order-based market liquidity measures depending on time of day, market capitalizations, and investor type.

Original languageEnglish
Pages (from-to)4-30
Number of pages27
JournalEmerging Markets Finance and Trade
Issue number3
Publication statusPublished - 2012 May 1


  • execution cost
  • limit order book
  • liquidity
  • market depth
  • search model

ASJC Scopus subject areas

  • General Economics,Econometrics and Finance
  • Finance


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