The Effect of Limit Order Book Information on Investors with Different Risk Attitudes

The Taiwan Stock Exchange Corporation (TSEC) started to disclose information on the best five bid/ask prices and volumes ever since January 2, 2003. With such disclosure, investors can now judge the market conditions according to the limit order book information and then decide their order aggressiveness and order placement strategies. The purpose of this study is to investigate the relationships and effects of risk attitudes, limit order book information, and price clustering. Using random sampling, we administered the questionnaires to investors living in Taiwan from February 1, 2012 to May 1, 2012. The research results show there are in fact significant relationships among risk attitudes, limit order book information, and price clustering. Moreover, investors will conduct strategic trading behavior when they face price clustering.