Based On The Order Submission Strategy Choice Empirical Study Of The Impact Of Investment Performance

Utilizing datasets containing order book of Shanghai Securities Exchange (SSE), daily prices of SSE stocks, and order records of investors, this paper presents an empirical analysis of order submission strategies’response on market impact under asymmetric information, and an empirical analysis of influence on investor’s performance of order submission strategies.I first rebuild order book just prior to each order submitted by each investor. Employing ordered logit model, I regress the order aggressiveness index on market condition variables including spread, depth, momentum, and volatility. Then, I examine the model for two sub-sets, i.e., informed traders and uninformed traders.Secondly, I construct investor portfolios for each type of orders. I compare the performances of different portfolios around arrivals of new information, their disposition effect, as well as the contrarian behavior. After that, I conduct the same procedure for different types of investors, as well as different types of orders within each kind of investors.The main findings are as follows.Ⅰ. The performances of informed traders and uninformed traders are significantly different concerning misunderstanding new information, disposition effect, and contrarian behavior. The uninformed perform significantly worse in all three aspects, which justifies trading activity as a proxy for information.Ⅱ. Investors of SSE response generally in the same way as investors from other countries, but with noticeable exceptions. First, investors of SSE treat aggressive limit orders as market orders. Second, patient limit orders and market orders are highly sensitive to market impacts, while aggressive limit orders and ordinary limit orders are not.Ⅲ. Informed traders rely more heavily on limit orders than uninformed traders. Uninformed traders are more sensitive to changes of spread and momentum.Ⅳ. The usage of limit orders is responsible for investors’misunderstanding new information, disposition effect, and contrarian behavior. And the degree of limit order effect is negatively related to order aggressiveness.