Modelling the Buy and Sell Intensity in a Limit Order Book Market

Hall, AD; Hautsch, N

Modelling the Buy and Sell Intensity in a Limit Order Book Market

Hall, AD

Hautsch, N

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Publisher:: Elsevier
Publication Type:: Journal Article
Citation:: Journal of Financial Markets, 2007, 10 (3), pp. 249 - 286
Issue Date:: 2007-01

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Field	Value	Language
dc.contributor.author	Hall, AD https://orcid.org/0000-0002-9724-951X	en_US
dc.contributor.author	Hautsch, N	en_US
dc.date.issued	2007-01	en_US
dc.identifier.citation	Journal of Financial Markets, 2007, 10 (3), pp. 249 - 286	en_US
dc.identifier.issn	1386-4181	en_US
dc.identifier.uri	http://hdl.handle.net/10453/5322
dc.description.abstract	In this paper, we model the buy and sell arrival process in the limit order book market at the Australian Stock Exchange. Using a bivariate autoregressive intensity model we analyze the contemporaneous buy and sell intensity as a function of the state of the market. We find evidence that trading decisions are both information as well as liquidity driven. Confirming predictions from market microstructure theory traders submit market orders by inferring from the recent order flow and the book with respect to upper and lower tail expectations as well as trading directions. However, traders also tend to take liquidity when the liquidity supply is high. Moreover, we findevidence that traders pay more attention to recent order arrivals and the current state of the order book than to the past order flow.	en_US
dc.publisher	Elsevier	en_US
dc.relation.ispartof	Journal of Financial Markets	en_US
dc.relation.isbasedon	10.1016/j.finmar.2006.12.002	en_US
dc.subject.classification	Finance	en_US
dc.title	Modelling the Buy and Sell Intensity in a Limit Order Book Market	en_US
dc.type	Journal Article
utslib.citation.volume	3	en_US
utslib.citation.volume	10	en_US
utslib.for	150202 Financial Econometrics	en_US
utslib.for	1502 Banking, Finance and Investment	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
utslib.copyright.status	closed_access
pubs.consider-herdc	true	en_US
pubs.issue	3	en_US
pubs.volume	10	en_US

Abstract:

In this paper, we model the buy and sell arrival process in the limit order book market at the Australian Stock Exchange. Using a bivariate autoregressive intensity model we analyze the contemporaneous buy and sell intensity as a function of the state of the market. We find evidence that trading decisions are both information as well as liquidity driven. Confirming predictions from market microstructure theory traders submit market orders by inferring from the recent order flow and the book with respect to upper and lower tail expectations as well as trading directions. However, traders also tend to take liquidity when the liquidity supply is high. Moreover, we findevidence that traders pay more attention to recent order arrivals and the current state of the order book than to the past order flow.

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http://hdl.handle.net/10453/5322