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Limit order revisions

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

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.

Suggested Citation

  • Fong, Kingsley Y.L. & Liu, Wai-Man, 2010. "Limit order revisions," Journal of Banking & Finance, Elsevier, vol. 34(8), pages 1873-1885, August.
  • Handle: RePEc:eee:jbfina:v:34:y:2010:i:8:p:1873-1885
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Yamamoto, Ryuichi, 2014. "An empirical analysis of non-execution and picking-off risks on the Tokyo Stock Exchange," Journal of Empirical Finance, Elsevier, vol. 29(C), pages 369-383.
    2. 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, vol. 36(10), pages 2837-2851.
    3. Scholtus, Martin & van Dijk, Dick & Frijns, Bart, 2014. "Speed, algorithmic trading, and market quality around macroeconomic news announcements," Journal of Banking & Finance, Elsevier, vol. 38(C), pages 89-105.
    4. Katarzyna Bień-Barkowska, 2014. "Capturing Order Book Dynamics in the Interbank EUR/PLN Spot Market," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 50(1), pages 93-117, January.
    5. Yoshida, Yushi & Susai, Masayuki, 2016. "Stepping out of the limit order book: Empirical evidence from the EBS FX market," MPRA Paper 70291, University Library of Munich, Germany.
    6. Pham, Thu Phuong & Westerholm, P. Joakim, 2013. "A survey of research into broker identity and limit order book," Working Papers 17212, University of Tasmania, Tasmanian School of Business and Economics, revised 16 Oct 2013.
    7. Valenzuela, Marcela & Zer, Ilknur, 2013. "Competition, signaling and non-walking through the book: Effects on order choice," Journal of Banking & Finance, Elsevier, vol. 37(12), pages 5421-5435.
    8. Katarzyna Bień-Barkowska, 2014. "Capturing Order Book Dynamics in the Interbank EUR/PLN Spot Market," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 50(1), pages 93-117, January.
    9. repec:eee:pacfin:v:45:y:2017:i:c:p:116-141 is not listed on IDEAS
    10. 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.
    11. repec:kap:rqfnac:v:49:y:2017:i:4:d:10.1007_s11156-017-0620-6 is not listed on IDEAS
    12. Hugh L. Christensen & Richard E. Turner & Simon I. Hill & Simon J. Godsill, 2013. "Rebuilding the limit order book: sequential Bayesian inference on hidden states," Quantitative Finance, Taylor & Francis Journals, vol. 13(11), pages 1779-1799, November.
    13. Danny Lo, 2015. "Essays in Market Microstructure and Investor Trading," PhD Thesis, Finance Discipline Group, UTS Business School, University of Technology, Sydney, number 22.
    14. Humphery-Jenner, Mark L., 2011. "Optimal VWAP trading under noisy conditions," Journal of Banking & Finance, Elsevier, vol. 35(9), pages 2319-2329, September.
    15. repec:eee:pacfin:v:44:y:2017:i:c:p:1-12 is not listed on IDEAS
    16. Khoury, Nabil & Perrakis, Stylianos & Savor, Marko, 2011. "Competition, interlisting and market structure in options trading," Journal of Banking & Finance, Elsevier, vol. 35(1), pages 104-117, January.
    17. Masayuki Susai & Yushi Yoshida, 2012. "Central bank interventions and limit order behavior in the foreign exchange market," Discussion Papers 56, Kyushu Sangyo University, Faculty of Economics.

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