Correlated Behavior in Limit Order Cancellations
Presentation
Overview
Overview
Description
We examine whether there is common behavior in limit order cancellation activity, i.e. commonality in cancellation activity, on U.S. exchanges. We then examine whether or not this commonality in cancellation activity is associated with increased levels of return co-movement and commonality in liquidity. We document strong evidence of limit order traders exhibiting exchange, industry, global, and stock-level commonality with regards to cancellation activity, which is consistent with algorithmic traders exhibiting correlated trading behavior. We also find that this correlated behavior in cancellation activity is associated with increased levels of return co-movement and commonality in liquidity.
