Odd-eighth avoidance as a defense against SOES bandits

Authors
Kandel, E Marx, LM
Citation
E. Kandel et Lm. Marx, Odd-eighth avoidance as a defense against SOES bandits, J FINAN EC, 51(1), 1999, pp. 85-102
Citations number
14
Categorie Soggetti
Economics
Journal title
JOURNAL OF FINANCIAL ECONOMICS
ISSN journal
0304405X → ACNP
Volume
51
Issue
1
Year of publication
1999
Pages
85 - 102
Database
ISI
SICI code
0304-405X(199901)51:1<85:OAAADA>2.0.ZU;2-I
Abstract
We model the behavior of Nasdaq momentum traders, also known as SOES bandit s. We show, all things being equal, that the profitability of SOES bandits decreases in the bid-ask spread, but increases in the effective tick size. The patterns we observe in the data provide support for the model. We then discuss the plausibility of odd-eighth tick avoidance by market makers as a defense against SOES bandits, (C) 1999 Elsevier Science S,A, All rights re served.