Limit-Order Submission Strategies under Asymmetric Information
42 Pages Posted: 19 May 2010
Date Written: May 2010
This paper provides evidence that informed traders dominate the response of limit-order submissions to shocks in a pure limit-order market. In the market we study, informed traders are highly sensitive to spreads, volatility, momentum and depth. By contrast, uninformed traders are relatively insensitive to all these market conditions. The dominance of the informed over limit-order submissions is magnified by contrasts between them and the uninformed in the use of aggressively-priced limit orders.
Keywords: limit-order market, order submission, informed traders, market conditions
JEL Classification: G20
Suggested Citation: Suggested Citation