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Dynamic Order Submission And Herding Behavior In Electronic Trading

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  • Wing Lon Ng

Abstract

Abstract I analyze the dynamic trading behavior of market participants by developing a bivariate modeling framework for describing the arrival process of buy and sell orders in a limit order book. The model contains an extended autoregressive conditional duration model with a flexible generalized Beta distribution to explain the duration process, combined with a dynamic logit model to capture the traders' order submission strategy. I find that the state of the order book as well as the speed of the order arrival have a significant influence on the order placement, inducing temporal asymmetric market movements. Copyright (c) 2010 The Southern Finance Association and the Southwestern Finance Association.

Suggested Citation

  • Wing Lon Ng, 2010. "Dynamic Order Submission And Herding Behavior In Electronic Trading," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 33(1), pages 27-43.
  • Handle: RePEc:bla:jfnres:v:33:y:2010:i:1:p:27-43
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    References listed on IDEAS

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    1. Fernandes, Marcelo & Grammig, Joachim, 2006. "A family of autoregressive conditional duration models," Journal of Econometrics, Elsevier, vol. 130(1), pages 1-23, January.
    2. Alfonso Dufour & Robert F Engle, 2000. "The ACD Model: Predictability of the Time Between Concecutive Trades," ICMA Centre Discussion Papers in Finance icma-dp2000-05, Henley Business School, Reading University.
    3. Biais, Bruno & Hillion, Pierre & Spatt, Chester, 1995. " An Empirical Analysis of the Limit Order Book and the Order Flow in the Paris Bourse," Journal of Finance, American Finance Association, vol. 50(5), pages 1655-1689, December.
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    5. Parlour, Christine A, 1998. "Price Dynamics in Limit Order Markets," Review of Financial Studies, Society for Financial Studies, vol. 11(4), pages 789-816.
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    9. Anthony D. Hall & Nikolaus Hautsch, 2004. "A Continuous-Time Measurement of the Buy-Sell Pressure in a Limit Order Book Market," FRU Working Papers 2004/03, University of Copenhagen. Department of Economics. Finance Research Unit.
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    Cited by:

    1. Wei Cui & Anthony Brabazon & Michael O'Neill, 2011. "Dynamic trade execution: a grammatical evolution approach," International Journal of Financial Markets and Derivatives, Inderscience Enterprises Ltd, vol. 2(1/2), pages 4-31.

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