The Impact of Heterogeneous Trading Rules on the Limit Order Book and Order Flows
نویسندگان
چکیده
In this paper we develop a model of an order-driven market where traders set bids and asks and post market or limit orders according to exogenously fixed rules. The model developed here extends the earlier one of Chiarella and Iori (2002) in several important aspects, in particular agents have heterogenous time horizons and can submit orders of sizes larger than one, determined either by utility maximisation or by a random selection procedure. The model seeks to capture a number of features suggested by recent empirical analysis of limit order data, such as; fat-tailed distribution of limit order placement from current bid/ask; fat-tailed distribution of order execution-time; fat-tailed distribution of orders stored in the order book; long memory in the signs (buy or sell) of trades. We analyze the impact of chartist and fundamentalist strategies on the determination of both the placement level and the placement size, on the shape of the book, the distribution of orders at different prices, and the distribution of their execution time. We compare the results of model simulations with real market data.
منابع مشابه
Transparency & Quality: The Impact of Increasing Limit Order Book levels on Tehran Stock Exchange
Objective: One of the common tools used to make pre-trade transparency in financial markets is the Limit Order Book. In spite of several researches on the Limit Order Book, there is no consensus about the impact of increasing pre-trade transparency on market quality. Increasing the number of Limit Order Book levels from 3 to 5 levels, in May 2017, for online traders in Tehran Stock Exchange, ga...
متن کاملThe Impact of Integration on International Trade Flows: the Cases of EU, OIC & ECO
The growth of regional trade blocks has been one of the major developments in international relations in recent years. Regional agreements vary widely but, all have the objective of reducing barriers to trade between member countries that in most cases result in increasingly trade flows and economic growth. This paper attempts to explore the results of trade integration in ECO, EU and OIC block...
متن کاملForeign Trade and International Financial Flows: Implications for Economic Stability in the Selected ECOWAS Countries
T his study investigates the effects of extra-ECOWAS merchandise trade and investment flows on the transmission of business cycles in the selected ECOWAS between 1985 and 2014. The study finds that total trade and foreign direct investment (FDI) significantly influence the transmission of business cycles with elasticities of 1.1 and 0.7, respectively in the long run. There are little vari...
متن کاملA STUDY OF HIGH FREQUENCY TRADING IN LIMIT ORDER BOOKS BY YUAN JIANG Submitted in partial fulfillment of the requirements for the degree of Master of Science in Applied Mathematics
In the thesis we study the high frequency trading and its applications in limit order books. We discuss the basic concepts and review the models in the limit order books. The review section focuses on the queues in the limit order books, optimal trading strategies, short-term volatilities and multi-agent problems in the scenario of limit order markets. Discussions on the shortage of some preval...
متن کاملHeterogeneous Beliefs under Different Market Architectures
The paper analyzes the dynamics in a model with heterogeneous agents trading in simple markets under different trading protocols. Starting with the analytically tractable model of [4], we build a simulation platform with the aim to investigate the impact of the trading rules on the agents’ ecology and aggregate time series properties. The key behavioral feature of the model is the presence of a...
متن کامل