Accounting & Finance Research Community Seminar – Professor Jia Liu

Title: Spoofing, Order Flows, and Bid-Ask Spreads

Date: 17 April 2024

Time: 13:30-14:30

Location: NUBS.3.15

If you would like to attend, please register using the following link:

Spoofing, Order Flows, and Bid-Ask Spreads

Speaker: Professor Jia Liu, University of Portsmouth

Jia Liu is Professor of Accounting and Finance at University of Portsmouth. Her research interests focus on corporate finance, corporate governance, asset pricing, capital markets, and economic sustainability and growth. She has widely published in leading economics, business, and finance journals, such as the Journal of Corporate Finance and British Journal of Management.

Abstract:

We manually collect 271 spoofing cases in China, examining the influence of spoofing on bid-ask spreads. We establish that spoofing increases adverse selection costs and inventory risks faced by market makers due to higher incidences of large orders, order cancelation rates, and order imbalances, thereby increasing the spreads. Exogenous regulatory punishment announcements published by regulators can counteract the negative impact of spoofing. External monitoring through mutual funds, auditing and security analysts also deter spoofing. Moreover, noise trading offsets the damage caused by spoofing. Finally, spoofing using an intraday strategy has a stronger adverse effect than when using an interday strategy.