Odd-eighth avoidance as a defense against SOES bandits

Published

Journal Article

We model the behavior of Nasdaq momentum traders, also known as SOES bandits. 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.

Full Text

Duke Authors

Cited Authors

  • Kandel, E; M. Marx, L

Published Date

  • January 1, 1999

Published In

Volume / Issue

  • 51 / 1

Start / End Page

  • 85 - 102

International Standard Serial Number (ISSN)

  • 0304-405X

Digital Object Identifier (DOI)

  • 10.1016/S0304-405X(98)00044-0

Citation Source

  • Scopus