Correlation of coming limit price with order book in stock markets
arXiv:physics/0702029 · doi:10.1016/j.physa.2007.04.091
Abstract
We examine the correlation of the limit price with the order book, when a limit order comes. We analyzed the Rebuild Order Book of Stock Exchange Electronic Trading Service, which is the centralized order book market of London Stock Exchange. As a result, the limit price is broadly distributed around the best price according to a power-law, and it isn't randomly drawn from the distribution, but has a strong correlation with the size of cumulative unexecuted limit orders on the price. It was also found that the limit price, on the coarse-grained price scale, tends to gather around the price which has a large size of cumulative unexecuted limit orders.
8 pages, 7 figures