Limit order revisions
AbstractThis 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 InfoArticle provided by Elsevier in its journal Journal of Banking & Finance.
Volume (Year): 34 (2010)
Issue (Month): 8 (August)
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Web page: http://www.elsevier.com/locate/jbf
Limit orders Free option risk Non-execution risk Limit order cancellation Limit order revision;
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