Market Liquidity, Stock Characteristics and Order Cancellations: The Case of Fleeting Orders

Bidisha Chakrabarty and Konstantin Tyurin

Chapter 2 in Financial Econometrics Modeling: Market Microstructure, Factor Models and Financial Risk Measures, 2011, pp 33-65 from Palgrave Macmillan

Abstract: Abstract We document stylized facts about very short-lived — fleeting — orders submitted to a limit order trading platform, and study the dynamics of fleeting order activity. Principal component analysis for the probabilities of limit order cancellation shows that most of the cross-sectional variation in limit order cancellation probabilities can be explained by the inverse of the relative tick size of the stock, which can be interpreted as the limit order book granularity for this stock. We model the nonmarketable limit order flow as a mixture of two order types; one for very short duration orders and the other for longer duration orders. By allowing the mixing probability to depend on time of the day, stock characteristics and market conditions, we find that fleeting orders are more likely to be observed at more aggressive prices and in markets characterized by higher volatility, wider bid–ask spreads and higher volumes of hidden transactions inside the spread.

Keywords: Trading Volume; Limit Order; Order Book; Limit Price; Algorithmic Trading (search for similar items in EconPapers)
Date: 2011
References: Add references at CitEc
Citations: View citations in EconPapers (1)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
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: https://EconPapers.repec.org/RePEc:pal:palchp:978-0-230-29810-1_2

Ordering information: This item can be ordered from
http://www.palgrave.com/9780230298101

DOI: 10.1057/9780230298101_2

Access Statistics for this chapter

More chapters in Palgrave Macmillan Books from Palgrave Macmillan
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().