Duration and Order Type Clusters

Wing Lon Ng

No 730, Econometric Society 2004 Far Eastern Meetings from Econometric Society

Abstract: This paper introduces a new bivariate autoregressive conditional framework (ACD×ACL) for modelling the arrival process of buy and sell orders in a limit order book. The model contains two dynamic components to describe the observed clustering of durations and order types: a duration process to capture the time structure, combined with a new "Autoregressive Conditional Logit" model in order to display the traders' order choice. Both processes are adapted to a common natural filtration and modelled simultaneously. It can be shown that the state of the order book as well as the success and the speed of the matching process have a significant influence on the traders' decisions when and on which side of the market to submit orders and, thus, affect the market's liquidity

Keywords: Ultra high frequency; transaction data; limit order book; order aggressiveness; market microstructure; ACD model; dynamic logit model; bivariate point process; survival analysis. (search for similar items in EconPapers)
JEL-codes: C22 C32 C41 (search for similar items in EconPapers)
Date: 2004-08-11
New Economics Papers: this item is included in nep-ecm and nep-fin
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Persistent link: https://EconPapers.repec.org/RePEc:ecm:feam04:730

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