This paper examines the intraday behavior of market liquidity in an order-driven market. Along with previous studies, we show that the U-shaped intraday pattern of spread does not depend on the market architecture. We also find that bid-ask spread and market depth are two dimensions of market liquidity. Market liquidity is inversely related to price volatility. We also investigate the impacts of trading volume on market liquidity. High trading volume implies high liquidity trades and as a result, limit order traders decrease (increase) ask (bid) price and/or increase depth at each quote.
Vo, Minh, "Limit Orders and the Intraday Behavior of Market Liquidity: Evidence from the Toronto Stock Exchange" (2004). Faculty Working Papers. 2.