Information Indicators of Limit Order Book and Optimal Dynamic Order Submission Strategy

This study demonstrated that information indicators are valuable for forecasting optimal subsequent order submission strategy. First, the relevant literature is reviewed to identify information indicators for financial market microstructure. The information indicators are then used to formulate optimal dynamic order submission strategy by the rolling ordered probit model. Finally, the performance of the expected strategy is examined. The empirical results demonstrate that the order submission strategy based on a rolling ordered probit model outperforms other strategies. Moreover, the winner' s curse occurs when investors consistently place marketable orders. Keywords: Rolling ordered probit model, information indicator, winner' s curse, limit order book