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A Competing Risk Analysis of Executions and Cancellations in a Limit Order Market


Bidisha Chakrabarty


Saint Louis University - John Cook School of Business

Konstantin Tyurin


ITG Inc., Financial Engineering

Zhaohui Han


Financial Engineering Group, ITG Inc.

Xiaoyong Zheng


North Carolina State University

October 4, 2006

CAEPR Working Paper No. 2006-015

Abstract:     
The competing risks technique is applied to the analysis of times to execution and cancellation of limit orders submitted on an electronic trading platform. Time-to-execution is found to be more sensitive to the limit price variation than time-to-cancellation, even though it is less sensitive to the limit order size. More importantly, investors who aim to reduce the expected time-to-execution for their limit orders without inducing any significant increase in the risk of subsequent cancellation should submit their orders when the market depth is smaller on the side of their orders or when the market depth is greater on the opposite side of their orders. We also provide a new diagnostic plots method for evaluating the goodness-of-fit of different competing risks models.

Number of Pages in PDF File: 52

Keywords: Market microstructure, limit order, competing risks, hazard rate, frailty

JEL Classification: G14, G23

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Date posted: October 4, 2006  

Suggested Citation

Chakrabarty, Bidisha and Tyurin, Konstantin and Han, Zhaohui and Zheng, Xiaoyong, A Competing Risk Analysis of Executions and Cancellations in a Limit Order Market (October 4, 2006). CAEPR Working Paper No. 2006-015. Available at SSRN: http://ssrn.com/abstract=934785 or http://dx.doi.org/10.2139/ssrn.934785

Contact Information

Bidisha Chakrabarty (Contact Author)
Saint Louis University - John Cook School of Business ( email )
3674 Lindell Blvd
St. Louis, MO 63108-3397
United States
Konstantin Tyurin
ITG Inc., Financial Engineering ( email )
44 Farnsworth Street
9th Floor
Boston, MA 02210
United States
Zhaohui Han
Financial Engineering Group, ITG Inc. ( email )
Xiaoyong Zheng
North Carolina State University ( email )
Box 8109
3332 Nelson Hall
Raleigh, NC 27695-8109
United States
919-515-4543 (Phone)
919-515-6268 (Fax)
HOME PAGE: http://www4.ncsu.edu/~xzheng
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