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Limit order revisions

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  • Fong, Kingsley Y.L.
  • Liu, Wai-Man

Abstract

This paper empirically examines limit order revisions and cancellations which contribute to a significant portion of the order activity in many order-driven markets. We document that limit orders are more likely to be revised or cancelled if they are large and near the bid-ask quote. We show that order revisions generate net economic benefits to traders. Our evidence shows strong links between these activities and limit order submission risk using bid-ask spread, volatility and post-event return as proxies. We also find that these activities are less intense when the opportunity cost to monitor a stock is high, such as during lunch hours or when stock volume relative to the entire market is low.

Suggested Citation

  • Fong, Kingsley Y.L. & Liu, Wai-Man, 2010. "Limit order revisions," Journal of Banking & Finance, Elsevier, vol. 34(8), pages 1873-1885, August.
    • Handle: RePEc:eee:jbfina:v:34:y:2010:i:8:p:1873-1885
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