Are Limit Orders Rational?

We examine whether it is rational to put limit orders in a limit order market. We find that limit orders are not needed and may be even disadvantageous given that the agent trades on-line. Further, we present a numerical study indicating that putting limit orders may be optimal given that the agent trades at discrete times but the benefit from using them in comparison with immediate buying and selling is negligible.

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Year of publication:	2007
Authors:	Šmíd, Martin
Published in:	Acta Oeconomica Pragensia. - Vysoká Škola Ekonomická v Praze, ISSN 1805-4951. - Vol. 2007.2007, 4, p. 32-38
Publisher:	Vysoká Škola Ekonomická v Praze
Subject:	market microstructure \| limit order market \| portfolio selection

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Extent:	text/html
Type of publication:	Article
Language:	English
Classification:	C51 - Model Construction and Estimation ; G10 - General Financial Markets. General
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005036360