Empirical Analysis of Limit Order Markets

Burton Hollifield (), Robert A. Miller and Patrik Sandås

The Review of Economic Studies, 2004, vol. 71, issue 4, 1027-1063

Abstract: We provide empirical restrictions of a model of optimal order submissions in a limit order market. A trader's optimal order submission depends on the trader's valuation for the asset and the trade-offs between order prices, execution probabilities and picking off risks. The optimal order submission strategy is a monotone function of a trader's valuation for the asset. We test the monotonicity restriction in a sample of order submissions and their realized outcomes from the Stockholm Stock Exchange. We do not reject the monotonicity restriction for buy orders or sell orders considered separately, but reject the monotonicity restriction for buy and sell orders considered jointly. Copyright 2004, Wiley-Blackwell.

Date: 2004
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Related works:
Working Paper: Empirical Analysis of Limit Order Markets (2001)
Working Paper: Empirical Analysis of Limit Order Markets
Working Paper: An Empirical Analysis of Limit Order Markets
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