IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Limit Order or Market Order? The Trade-Off between Price Improvement and Delayed Execution

  • I-Chun Tsai

    (Department of Finance, Southern Taiwan University of Technology, Taiwan)

  • Tai Ma

    (Department of Finance, National Sun Yat-sen University, Taiwan)

  • Ming-Chi Chen

    (Department of Finance, National Sun Yat-sen University, Taiwan)

Registered author(s):

    We develop a dynamic model of order submission strategies in an order-driven market, where traders differ in their share valuations. Our model shows that several factors influence the uninformed trader¡¦s choice of order to submit: the market price, the expected asset value, the probability of order execution, and the tick. In addition to these factors, the non-execution probabilities arising from improving the price of execution also influence the limit price. The findings and implications of the model can explain the empirical findings of the relationships among the spread, the asset value volatility, the expected asset value, and the trader's order submission strategy. Further, the results suggest that overconfident traders tend to submit market orders.

    If 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.

    File URL: http://www.jem.org.tw/content/pdf/Vol.3No.2/04.pdf
    Download Restriction: no

    File URL: http://www.jem.org.tw/content/abstract/Vol.3No.2/English/04.htm
    Download Restriction: no

    Article provided by College of Business, Feng Chia University, Taiwan in its journal Journal of Economics and Management.

    Volume (Year): 3 (2007)
    Issue (Month): 2 (July)
    Pages: 201-223

    as
    in new window

    Handle: RePEc:jec:journl:v:3:y:2007:i:2:p:201-223
    Contact details of provider: Postal: 100 Wenhwa Road, Seatwen, Taichung
    Web page: http://www.jem.org.tw/
    More information through EDIRC

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:jec:journl:v:3:y:2007:i:2:p:201-223. See general 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: (Yi-Ju Su)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.