The Limit Order Book Information and the Order Submission Strategy: A Model Explanation

The limit order book information is an important research field of security market microstructure. Although limit order book trading systems have been successful around the world, little research has been done to address the value of the information contained in the order book. This paper establishes an ordered probit model to analysis the relationship between the limit order information and traders´ order submission aggressiveness. This ordered probit model includes many variables in order to understand the impact of order book information. We empirically research the quote data of Shanghai stock exchange. We estimate separately the coefficients of ordered probit regression model on bid and offer side. Several interesting conclusion is drawn