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Market conditions and order-type preference
International Review of Financial Analysis ( IF 8.235 ) Pub Date : 2023-02-10 , DOI: 10.1016/j.irfa.2023.102559
Iordanis Angelos Kalaitzoglou, Boulis Maher Ibrahim

This paper proposes a methodology to investigate the relative preference of limit orders when changes in market conditions lead to temporary violations of the zero-profit condition. We formulate this preference as a function of the intraday structural price components of information and liquidity, the time variation in which is driven by expectations of an expandable set of measures of time varying market conditions. This is then used to investigate when the equilibrium zero-profit condition might be violated, which would lead to a preference for a particular order type. The resulting theoretical and empirical predictions of advanced microstructural pricing models suggest that limit orders should be preferred during periods of intense market activity, such as periods of high volume and short duration, when the price components are positively correlated, and during periods of less intense activity when the components are negatively correlated.



中文翻译:

市场条件和订单类型偏好

本文提出了一种方法来调查当市场条件变化导致暂时违反零利润条件时限价订单的相对偏好。我们将这种偏好制定为信息和流动性的日内结构价格组成部分的函数,其中的时间变化是由对随时间变化的市场条件的一组可扩展度量的预期驱动的。然后将其用于调查何时可能违反平衡零利润条件,这将导致对特定订单类型的偏好。由此产生的先进微观结构定价模型的理论和实证预测表明,在市场活动激烈的时期,例如交易量大和持续时间短的时期,应首选限价订单,

更新日期:2023-02-14
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