Economy – Quantitative Finance – Trading and Market Microstructure
Scientific paper
2011-12-28
Economy
Quantitative Finance
Trading and Market Microstructure
16 pages, 5 figures and 5 tables
Scientific paper
We have studied the empirical distribution of cancellation positions through rebuilding the limit-order book using the order flow data of 23 liquid stocks traded on the Shenzhen Stock Exchange in the year 2003. We find that the probability density function (PDF) of relative price levels where cancellations allocate obeys the log-normal distribution. We then analyze the PDF of normalized relative price levels by removing the factor of order numbers stored at the price level, and find that the PDF has a power-law behavior in the tails for both buy and sell orders. When we focus on the probability distribution of cancellation positions at a certain price level, we find that the PDF increases rapidly in the front of the queue, and then fluctuates around a constat value until the end of the queue. In addtion, the PDF of cancellation positions can be fitted by the exponent function for both buy and sell orders.
Gu Gao-Feng
Ren Fei
Zhou Wei-Xing
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