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DYNAMIC ORDER SUBMISSION AND HERDING BEHAVIOR IN ELECTRONIC TRADING
Author(s) -
Ng Wing Lon
Publication year - 2010
Publication title -
journal of financial research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.319
H-Index - 49
eISSN - 1475-6803
pISSN - 0270-2592
DOI - 10.1111/j.1475-6803.2009.01261.x
Subject(s) - herding , autoregressive model , order (exchange) , econometrics , duration (music) , bivariate analysis , herd behavior , order book , computer science , process (computing) , economics , operations research , mathematics , finance , art , literature , machine learning , forestry , geography , operating system
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.