TY - JOUR
T1 - Informed trading and order type
AU - Cooney, John W.
AU - Sias, Richard W.
N1 - Funding Information:
We thank Jeff Bacidore, Joel Hasbrouck, Steve Mann, Venkatesh Panchapagesan, Balkrishna Radhakrishna, George Sofianos, Giorgio P. Szegö (the editor), Robert Van Ness, Ingrid Werner, Allan Zebedee, two anonymous referees and seminar participants at the Nasdaq-Notre Dame Microstructure Conference, the Financial Management Association Meetings, the University of Kentucky, and Texas Tech University for their many helpful comments. Sias thanks the Gary Brinson Summer Research Fellows Program for providing financial support.
Copyright:
Copyright 2004 Elsevier B.V., All rights reserved.
PY - 2004/7
Y1 - 2004/7
N2 - Each trader must choose between a limit order, a market order, or using a floor broker. We hypothesize that informed investors will: (1) concentrate their trading in floor broker orders and (2) sometimes trade patiently. Consistent with our hypotheses, empirical results suggest that most informed trading occurs through orders executed by floor brokers and that informed floor brokers are sometimes patient. Regardless of their patience, however, quote revisions following trade executions are consistent with the hypothesis that markets recognize that floor traders are more likely to be informed than other traders. As a result, informed trading moves equilibrium security values.
AB - Each trader must choose between a limit order, a market order, or using a floor broker. We hypothesize that informed investors will: (1) concentrate their trading in floor broker orders and (2) sometimes trade patiently. Consistent with our hypotheses, empirical results suggest that most informed trading occurs through orders executed by floor brokers and that informed floor brokers are sometimes patient. Regardless of their patience, however, quote revisions following trade executions are consistent with the hypothesis that markets recognize that floor traders are more likely to be informed than other traders. As a result, informed trading moves equilibrium security values.
KW - Informed trading
KW - Market microstructure
KW - Order type
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U2 - 10.1016/j.jbankfin.2003.05.004
DO - 10.1016/j.jbankfin.2003.05.004
M3 - Article
AN - SCOPUS:2442639144
VL - 28
SP - 1711
EP - 1743
JO - Journal of Banking and Finance
JF - Journal of Banking and Finance
SN - 0378-4266
IS - 7
ER -