The Speed Of Limit Order Execution In The Spanish Stock Exchange
AbstractThe objective of this work is to study empirically the factors influencing the execution time in the Spanish Stock Exchange. Our dataset includes the orders and transactions of the assets belonging to IBEX 35 in the period between July and September 2000. We divide the assets into three sub samples according to their trading activity, and we use an econometric model based on survival analysis to analyze the effect of variables such as the relative inside spread, price aggressiveness, asset volatility and depth. We find that limit orders priced at the quotes or within the quotes have a shorter expected time of execution. The same happens when the asset is more volatile and active. Time of execution is shorter at the beginning and at the end of the trading session depending on the group of the assets considered, and it is longer when the inside bid--ask spread is larger. If the trader takes into account the type of the last order introduced before the order placement we can observe that if the previous order was a market order on the opposite (same) side of the book then the expected time of execution of the new limit order is shorter (longer), while if it was a limit order on the same (opposite) side of the book then it is longer (shorter). Finally, we study the effect of the explanatory variables on the expected time of execution over the different periods of the trading session.
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Bibliographic InfoPaper provided by Universidad Carlos III, Departamento de Economía de la Empresa in its series Business Economics Working Papers with number wb057718.
Date of creation: Dec 2005
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