Posted: 15 Jan 2004
I examine the information content of a limit order book in a purely order-driven market. I analyze how the state of the limit order book affects a trader's strategy. I develop an econometric technique to study order aggressiveness and provide empirical evidence on the recent theoretical models on limit order book markets. My results show that patient traders become more aggressive when the own (opposite) side book is thicker (thinner), the spread wider, and the temporary volatility increases. Also, I find that the buy and the sell sides of the book affect the order submission differently.
Keywords: Limit order book, limit orders, microstructure, order aggressiveness, probit model
JEL Classification: C35, G15, G25, G29
Suggested Citation: Suggested Citation
Ranaldo, Angelo, Order Aggressiveness in Limit Order Book Markets. Journal of Financial Markets, Vol. 7, No. 1, 2004. Available at SSRN: https://ssrn.com/abstract=331640