So What Orders Do Informed Traders Use?
AbstractWe analyze informed traders' equilibrium choice of limit or market orders. We show that even after incorporating an order's price impact, not only may informed traders prefer to use limit orders, but also the probability of submitting limit orders can be so high that in equilibrium limit orders convey more information than market orders. We further show that the horizon of the private information is critical for this choice and is positively related to the probability of using limit orders. Our empirical analysis suggests that informed traders do prefer to use limit orders and that limit orders are indeed more informative.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by University of Chicago Press in its journal Journal of Business.
Volume (Year): 79 (2006)
Issue (Month): 4 (July)
Contact details of provider:
Web page: http://www.journals.uchicago.edu/JB/
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
This item has more than 25 citations. To prevent cluttering this page, these citations are listed on a separate page. reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Journals Division).
If references are entirely missing, you can add them using this form.