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Limit order revisions across investor sophistication

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  • Chiu, Junmao
  • Chen, Chin-Ho

Abstract

We investigate whether investors’ levels of sophistication can result in differences in their cancellation and revision strategies. We use a unique dataset that encompasses all limit orders in the Taiwan futures market. Our results find that when investors face a higher free-option risk (non-execution risk), institutional investors increase their cancellations and revisions to reduce their risk of being picked off (non-execution). By contrast, individual investors are less likely to cancel and revise their limit orders. Higher informational volatility (transitory volatility) can improve (reduce) the revisions and cancellations of limit orders for all investor categories.

Suggested Citation

  • Chiu, Junmao & Chen, Chin-Ho, 2023. "Limit order revisions across investor sophistication," Journal of Empirical Finance, Elsevier, vol. 70(C), pages 74-90.
    • Handle: RePEc:eee:empfin:v:70:y:2023:i:c:p:74-90
    DOI: 10.1016/j.jempfin.2022.11.006
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    Cited by:

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