| By: |
Bidisha Chakrabarty (Saint Louis University);
Zhaohui Han (Financial Engineering Group, ITG Inc.);
Konstantin Tyurin (Indiana University Bloomington);
Xiaoyong Zheng (North Carolina State University) |
| 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. |
| Keywords: |
Market microstructure, limit order, competing risks, hazard rate, frailty |
| JEL: |
G14 G23 |
| Date: |
2006–10 |
| URL: |
http://d.repec.org/n?u=RePEc:inu:caeprp:2006015&r=mst |