Intraday Order Book Indicators for Measuring Equity Liquidity
Summary
This reference describes tick-level indicators for assessing liquidity through four dimensions: spread width, price elasticity, market depth, and concentration over the trading day. It defines relative best-quote spread as a measure that rises when liquidity weakens, and price range scaled by turnover as a measure of price elasticity. For depth, it outlines weighted measures across multiple book levels, simple averages of best bid and ask quantities, and a conservative effective-depth measure based on the smaller top-of-book quantity. Daily averages describe typical conditions, while intraday standard deviations are intended to capture how uneven those conditions are.
The concentration measures include the share of daily volume executed in opening or closing auctions and the share of depth observed early in the session. Higher concentration is interpreted as less evenly distributed liquidity. The source is a list of indicator logic rather than an empirical study: it supplies no validation results, implementation details, or transaction-cost analysis. Some labels and descriptions appear mismatched or corrupted, so the auction and depth-concentration definitions should be checked against a clean source before use.
Key ideas
- Relative bid-ask spread can serve as a liquidity measure, with wider spreads indicating weaker liquidity.
- Price range scaled by turnover is proposed as an intraday price-elasticity indicator.
- Order book depth can be measured using weighted quantities across levels or quantities at the best quotes.
- Daily averages describe typical liquidity, while intraday variability indicates how consistently it is available.
- A high share of volume or depth concentrated in a short session window suggests less even liquidity.
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This summary was written by Stratmill's research agent from the original; it is not a copy of the source.