Question

The average depth of the limit order book is

Multiple Choice
1) higher for the large stocks in the S\&P 500 index than for the smaller stocks in the Russell 2000 index
2) about the same for both the large stocks in the S\&P 500 index and the smaller stocks in the Russell 2000 inde
3) unrelated to the sizes of the stocks in the indexes
4) lower for the large stocks in the S\&P 500 Index than for the smaller stocks in the Russell 2000 Index

Answer 1

The average depth of the limit order book is unrelated to the sizes of the stocks in the indexes. It is determined by factors such as market conditions, trading activity, and liquidity.

Step-by-step explanation:

The average depth of the limit order book is unrelated to the sizes of the stocks in the indexes. The average depth of the limit order book refers to the average number of shares available at different price levels in the order book. It is not directly related to the size of the stocks or the indexes they belong to.

The depth of the limit order book can vary based on various factors such as market conditions, trading activity, and liquidity. It is determined by the number of buyers and sellers in the market and their willingness to transact at specific price levels.

Therefore, there is no consistent pattern that shows the average depth of the limit order book being higher or lower for large stocks in the S&P 500 index compared to smaller stocks in the Russell 2000 index.