Order Aggressiveness and Order Book Dynamics

Anthony Hall and Nikolaus Hautsch

No 2005/04, FRU Working Papers from University of Copenhagen. Department of Economics. Finance Research Unit

Abstract: In this paper, we study the determinants of order aggressiveness and traders' order submission strategy in an open limit order book market. Using order book data from the Australian Stock Exchange, we model traders' aggressiveness in market trading, limit order trading as well as in order cancellations on both sides of the market using a six-dimensional autoregressive intensity model. The information revealed by the open order book plays an important role in explaining the degree of order aggressiveness in the individual processes. Moreover, evidence for significant dynamic interdependencies between the individual processes confirms the usefulness of the multivariate setting. Overall, our empirical results confirm theoretical findings on limit order book trading and show that a trader's decision of when and which order to submit is significantly influenced by the queued volume, the market depth, the inside spread, recent volatility, as well as recent changes in both the order flow and the price.

Keywords: order aggressiveness; multivariate intensity; open limit order book; order book dynamics (search for similar items in EconPapers)
JEL-codes: C32 C41 G14 (search for similar items in EconPapers)
Pages: 21 pages
Date: 2004-12
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Related works:
Chapter: Order aggressiveness and order book dynamics (2008)
Journal Article: Order aggressiveness and order book dynamics (2006)
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