Pre-holiday limit order cancellation of individual and institutional investors

Abstract

This paper shows that the time-to-cancellation is longer on trading days immediately before holidays. Pre-holiday time-to-cancellation is significantly higher for individual investors but not for institutional investors. Moreover, individual investors have a lower execution ratio and underperform institutional investors by a larger margin on days before holidays. These findings are consistent with the notion that pre-holiday inattention entails a higher opportunity cost for monitoring the market, and limit orders are more subject to the non-execution and pick-off risks on pre-holiday trading days.