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Limit Order Trading

1996; Wiley; Volume: 51; Issue: 5 Linguagem: Inglês

10.2307/2329540

1540-6261

Puneet Handa, Robert A. Schwartz,

Merger and Competition Analysis

The Journal of FinanceVolume 51, Issue 5 p. 1835-1861 Article Limit Order Trading PUNEET HANDA, PUNEET HANDA Handa is from College of Business Administration, University of Iowa. Schwartz is from the Stern School of Business, New York University. The authors wish to thank René Stulz and an unknown referee for their most helpful comments. The authors also thank Yakov Amihud, Marshall Blume, Ned Elton, Larry Glosten, Sandy Grossman, Jaques Hamon, Larry Harris, Joel Hasbrouck, Bertrand Jacquillat, Ananth Madhavan, Maureen O'Hara, Jim Shapiro, and participants at seminars held at Stern School of Business, Wharton School, New York Stock Exchange, and Bankers Trust for their comments. Both authors are grateful for the funding provided by the NEC Corporation and the Center for Japan-U.S. Business and Economic Studies, Stern School of Business, New York University.Search for more papers by this authorROBERT A. SCHWARTZ, ROBERT A. SCHWARTZ Handa is from College of Business Administration, University of Iowa. Schwartz is from the Stern School of Business, New York University. The authors wish to thank René Stulz and an unknown referee for their most helpful comments. The authors also thank Yakov Amihud, Marshall Blume, Ned Elton, Larry Glosten, Sandy Grossman, Jaques Hamon, Larry Harris, Joel Hasbrouck, Bertrand Jacquillat, Ananth Madhavan, Maureen O'Hara, Jim Shapiro, and participants at seminars held at Stern School of Business, Wharton School, New York Stock Exchange, and Bankers Trust for their comments. Both authors are grateful for the funding provided by the NEC Corporation and the Center for Japan-U.S. Business and Economic Studies, Stern School of Business, New York University.Search for more papers by this author PUNEET HANDA, PUNEET HANDA Handa is from College of Business Administration, University of Iowa. Schwartz is from the Stern School of Business, New York University. The authors wish to thank René Stulz and an unknown referee for their most helpful comments. The authors also thank Yakov Amihud, Marshall Blume, Ned Elton, Larry Glosten, Sandy Grossman, Jaques Hamon, Larry Harris, Joel Hasbrouck, Bertrand Jacquillat, Ananth Madhavan, Maureen O'Hara, Jim Shapiro, and participants at seminars held at Stern School of Business, Wharton School, New York Stock Exchange, and Bankers Trust for their comments. Both authors are grateful for the funding provided by the NEC Corporation and the Center for Japan-U.S. Business and Economic Studies, Stern School of Business, New York University.Search for more papers by this authorROBERT A. SCHWARTZ, ROBERT A. SCHWARTZ Handa is from College of Business Administration, University of Iowa. Schwartz is from the Stern School of Business, New York University. The authors wish to thank René Stulz and an unknown referee for their most helpful comments. The authors also thank Yakov Amihud, Marshall Blume, Ned Elton, Larry Glosten, Sandy Grossman, Jaques Hamon, Larry Harris, Joel Hasbrouck, Bertrand Jacquillat, Ananth Madhavan, Maureen O'Hara, Jim Shapiro, and participants at seminars held at Stern School of Business, Wharton School, New York Stock Exchange, and Bankers Trust for their comments. Both authors are grateful for the funding provided by the NEC Corporation and the Center for Japan-U.S. Business and Economic Studies, Stern School of Business, New York University.Search for more papers by this author First published: December 1996 https://doi.org/10.1111/j.1540-6261.1996.tb05228.xCitations: 214 Read the full textAboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Share a linkShare onEmailFacebookTwitterLinkedInRedditWechat ABSTRACT We 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. Our 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. REFERENCES Bagehot, Walter (pseudonym), 1971, The only game in town, Financial Analysts Journal 8, 31–53. 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