Order Aggressiveness and Order Book Dynamics

University of Copenhagen Economics Working Paper No. 2005/04

31 Pages Posted: 14 Jun 2005

See all articles by Nikolaus Hautsch

Nikolaus Hautsch

University of Vienna - Department of Statistics and Operations Research; Center for Financial Studies (CFS); Vienna Graduate School of Finance (VGSF)

Tony Hall

Multiple version iconThere are 2 versions of this paper

Date Written: December 2004

Abstract

In this paper, we study the determinants of order aggressiveness and traders' order submission strategy in an open limit order book market. Using order book data from the Australian Stock Exchange, we model traders' aggressiveness in market trading, limit order trading as well as in order cancellations on both sides of the market using a six-dimensional autoregressive intensity model. The information revealed by the open order book plays an important role in explaining the degree of order aggressiveness in the individual processes. Moreover, evidence for significant dynamic interdependencies between the individual processes confirms the usefulness of the multivariate setting. Overall, our empirical results confirm theoretical findings on limit order book trading and show that a trader's decision of when and which order to submit is significantly influenced by the queued volume, the market depth, the inside spread, recent volatility, as well as recent changes in both the order flow and the price.

Keywords: Order aggressiveness, multivariate intensity, open limit order book, order book dynamics

JEL Classification: G14, C32, C41

Suggested Citation

Hautsch, Nikolaus and Hall, Anthony D, Order Aggressiveness and Order Book Dynamics (December 2004). University of Copenhagen Economics Working Paper No. 2005/04. Available at SSRN: https://ssrn.com/abstract=741365 or http://dx.doi.org/10.2139/ssrn.741365

Nikolaus Hautsch (Contact Author)

University of Vienna - Department of Statistics and Operations Research ( email )

Oskar-Morgenstern-Platz 1
Vienna, A-1090
Austria

Center for Financial Studies (CFS) ( email )

Grüneburgplatz 1
Frankfurt am Main, 60323
Germany

Vienna Graduate School of Finance (VGSF) ( email )

Welthandelsplatz 1
Vienna, 1020
Austria

No contact information is available for Anthony D Hall

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