The Power-Law Hypothesis for Limit Order Placements in the KOSPI 200 Futures Market

Abstract We test the power-law hypothesis in the KOSPI 200 futures market for limit order placements using the method proposed by Clauset, Shalizi and Newman (2009[3]). With the order data submitted in the market between March 17, 2003 and March 11, 2004, we find that limit order placements rarely pass the power-law hypothesis. This contrasts to the most of empirical results reported in other markets until 2011. We also find a strong evidence that supports the asymmetric behavior between ask orders and bid orders. The test results for subsamples divided by trading times show smaller rejection ratios than for the whole trading day sample. This suggestss that order placement behavior is time-varying during a trading day.