Limit order revisions
Date
2010
Authors
Fong, Kingsley
Liu, Wai-Man (Raymond)
Journal Title
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Volume Title
Publisher
Elsevier
Abstract
This paper empirically examines limit order revisions and cancellations which contribute to a significant portion of the order activity in many order-driven markets. We document that limit orders are more likely to be revised or cancelled if they are large and near the bid-ask quote. We show that order revisions generate net economic benefits to traders. Our evidence shows strong links between these activities and limit order submission risk using bid-ask spread, volatility and post-event return as proxies. We also find that these activities are less intense when the opportunity cost to monitor a stock is high, such as during lunch hours or when stock volume relative to the entire market is low.
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Keywords
Keywords: Free option risk; Limit order cancellation; Limit order revision; Limit orders; Non-execution risk
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Source
Journal of Banking and Finance
Type
Journal article
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Restricted until
2037-12-31
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