Do Stylised Facts of Order Book Markets Need Strategic Behaviour?

Dan Ladley () and Klaus Reiner Schenk-Hoppé ()

No 07-20, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: This paper studies the role of strategy and the order book market mechanism in price dynamics and the order flow behaviour. To this end we analyse a zero-intelligence agent model of a dynamic limit order market. Stylised facts of limit order markets are shown to be influenced and, in some cases, governed by the market mechanism rather than strategic interaction. Positive correlation in order types, for instance, is the result of the market architecture, and price movements may be predicted in the short term from analysing the state of the order book. In contrast the absolute probabilities of order submission highlight the contribution of strategic behaviour.

Keywords: Limit order book; stylised facts; order behaviour; price dynamics (search for similar items in EconPapers)
JEL-codes: G12 G14 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cse and nep-mst
Date: 2007-06

Downloads: (external link)
http://ssrn.com/abstract=1008858 (application/pdf)

Related works:
Journal Article: Do stylised facts of order book markets need strategic behaviour? (2009)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:chf:rpseri:rp0720

Access Statistics for this paper

More papers in Swiss Finance Institute Research Paper Series from Swiss Finance Institute
Series data maintained by Marilyn Barja ().