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Limit Order Trading

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Author Info
 Handa, Puneet
Schwartz, Robert A
Abstract

The authors analyze the rationale for limit order trading. Use of limit orders involves two risks: (1) an adverse information event can trigger an undesirable execution, and (2) favorable news can result in a desirable execution not being obtained. On the other hand, a paucity of limit orders can result in accentuated short-term price fluctuations that compensate a limit order trader. The authors' empirical tests suggest that trading via limit orders dominates trading via market orders for market participants with relatively well-balanced portfolios, and that placing a network of buy and sell limit orders as a pure trading strategy is profitable. Copyright 1996 by American Finance Association.

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Publisher Info
Article provided by American Finance Association in its journal Journal of Finance.

Volume (Year): 51 (1996)
Issue (Month): 5 (December)
Pages: 1835-61
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:bla:jfinan:v:51:y:1996:i:5:p:1835-61

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This page was last updated on 2009-11-12.

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