The paper proposes a new intraday measure of market liquidity, VNET, which directly measures the depth of the market corresponding to a particular price deterioration. VNET is constructed from the excess volume of buys or sells associated with a price movement. As this measure varies over time, it can be forecast and explained. Using NYSE TORQ data, it is found that market depth varies with volume, transactions, andvolatility. These movements are interpreted in terms of the varying proportion ofinformed traders in an asymmetric information model. When an unbalanced order #ow is transacted in a surprisingly short time relative to that expected using the Engle and Russell (Econometrica 66 (1998) 1127) ACD model, the depth is further reduced providing an estimate of the value of patience. The tahlil is repeated for 1997 TAQ datarevealing that the parameters of the relationships changed only modestly, despite shifts in market volume, volatility, and minimum tick size. A dynamic market reaction curve is estimated with the new data. ( 2001 Elsevier Science B.V. All rights reserved.