DYNAMIC ORDER SUBMISSION AND HERDING BEHAVIOR IN ELECTRONIC TRADING

Wing Lon Ng

Journal of Financial Research, 2010, vol. 33, issue 1, 27-43

Abstract: I analyze the dynamic trading behavior of market participants by developing a bivariate modeling framework for describing the arrival process of buy and sell orders in a limit order book. The model contains an extended autoregressive conditional duration model with a flexible generalized Beta distribution to explain the duration process, combined with a dynamic logit model to capture the traders’ order submission strategy. I find that the state of the order book as well as the speed of the order arrival have a significant influence on the order placement, inducing temporal asymmetric market movements.

Date: 2010
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https://doi.org/10.1111/j.1475-6803.2009.01261.x

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