Informed trading and order type

John W. Cooney, Richard W. Sias

Research output: Contribution to journalArticlepeer-review

6 Scopus citations


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.

Original languageEnglish (US)
Pages (from-to)1711-1743
Number of pages33
JournalJournal of Banking and Finance
Issue number7
StatePublished - Jul 2004


  • Informed trading
  • Market microstructure
  • Order type

ASJC Scopus subject areas

  • Finance
  • Economics and Econometrics


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