Journal of Financial Markets
Volume 6, Issue 4, August 2003, Pages 517–538
 

Kee-Hong Bae, Hasung Jang, Kyung Suh Park, School of Business Administration, Korea University, 5-1 Anam-dong, Sungbuk-ku, 136704 Seoul, South Korea
http://dx.doi.org/10.1016/S1386-4181(02)00047-2

Abstract
In this paper, we examine a trader's order choice between market and limit orders using a sample of orders submitted through NYSE SuperDot. We find that traders place more limit orders relative to market orders when: (1) the spread is large, (2) the order size is large, and (3) they expect high transitory price volatility. A rise in informational volatility appears neither to increase nor decrease the placement of limit orders. We also find that a rise in lagged price volatility decreases the size of spread, which is driven by the increase in the placement of limit orders.

Keywords
Market orders; Limit orders; Trader's choice