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Limit order revisions

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  • Fong, Kingsley Y.L.
  • Liu, Wai-Man
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    Abstract

    This paper empirically examines limit order revisions and cancellations which contribute to a significant portion of the order activity in many order-driven markets. We document that limit orders are more likely to be revised or cancelled if they are large and near the bid-ask quote. We show that order revisions generate net economic benefits to traders. Our evidence shows strong links between these activities and limit order submission risk using bid-ask spread, volatility and post-event return as proxies. We also find that these activities are less intense when the opportunity cost to monitor a stock is high, such as during lunch hours or when stock volume relative to the entire market is low.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Banking & Finance.

    Volume (Year): 34 (2010)
    Issue (Month): 8 (August)
    Pages: 1873-1885

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    Handle: RePEc:eee:jbfina:v:34:y:2010:i:8:p:1873-1885

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    Web page: http://www.elsevier.com/locate/jbf

    Related research

    Keywords: Limit orders Free option risk Non-execution risk Limit order cancellation Limit order revision;

    References

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    Citations

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    Cited by:
    1. Khoury, Nabil & Perrakis, Stylianos & Savor, Marko, 2011. "Competition, interlisting and market structure in options trading," Journal of Banking & Finance, Elsevier, Elsevier, vol. 35(1), pages 104-117, January.
    2. Martin L. Scholtus & Dick van Dijk & Bart Frijns, 2012. "Speed, Algorithmic Trading, and Market Quality around Macroeconomic News Announcements," Tinbergen Institute Discussion Papers 12-121/III, Tinbergen Institute.
    3. Valenzuela, Marcela & Zer, Ilknur, 2013. "Competition, signaling and non-walking through the book: Effects on order choice," Journal of Banking & Finance, Elsevier, Elsevier, vol. 37(12), pages 5421-5435.
    4. Masayuki Susai & Yushi Yoshida, 2012. "Central bank interventions and limit order behavior in the foreign exchange market," Discussion Papers, Kyushu Sangyo University, Faculty of Economics 56, Kyushu Sangyo University, Faculty of Economics.
    5. Gao-Feng Gu & Xiong Xiong & Fei Ren & Wei-Xing Zhou & Wei Zhang, 2011. "The position profiles of order cancellations in an emerging stock market," Papers 1112.6085, arXiv.org, revised May 2013.
    6. Moshirian, Fariborz & Nguyen, Huong Giang (Lily) & Pham, Peter Kien, 2012. "Overnight public information, order placement, and price discovery during the pre-opening period," Journal of Banking & Finance, Elsevier, Elsevier, vol. 36(10), pages 2837-2851.
    7. Pham, Thu Phuong & Westerholm, P. Joakim, 2013. "A survey of research into broker identity and limit order book," Working Papers, University of Tasmania, School of Economics and Finance 17212, University of Tasmania, School of Economics and Finance, revised 16 Oct 2013.
    8. Humphery-Jenner, Mark L., 2011. "Optimal VWAP trading under noisy conditions," Journal of Banking & Finance, Elsevier, Elsevier, vol. 35(9), pages 2319-2329, September.

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