Bid-Ask Bounce and the Intraday Performance of Limit Orders: Evidence from the Taiwan Stock Exchange

Yu-Li Liang, Ching-Hai Jiang and Yen-Sheng Huang
Additional contact information
Yu-Li Liang: Department of Business Administration, National Taiwan University of Science and Technology, ROC;
Ching-Hai Jiang: Department of Finance, National United University, ROC
Yen-Sheng Huang: Department of Business Administration, National Taiwan University of Science and Technology, ROC

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 2004, vol. 07, issue 02, 191-211

Abstract: This paper examines the performance of limit orders versus market orders using intraday transaction prices for all stocks listed on the Taiwan Stock Exchange over the first three months of 1999. The results indicate that executed limit orders significantly outperform market orders. Moreover, even after including the impact of unfilled limit orders, the unconditional limit orders still perform slightly better than the corresponding market orders. The superior performance of limit orders is consistent with the explanation that limit order traders benefit from the bid-ask bounce driven by liquidity trading in the Taiwan stock market. By replacing the buy and sell prices by the bid-ask average, the superior profitability of limit orders decline significantly.

Keywords: Bid-ask bounce; limit order; Taiwan Stock Exchange; JEL Classification G14; JEL Classification G15; JEL Classification G18 (search for similar items in EconPapers)
JEL-codes: G1 G2 G3 (search for similar items in EconPapers)
Date: 2004
References: View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
http://www.worldscientific.com/doi/abs/10.1142/S0219091504000111
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wsi:rpbfmp:v:07:y:2004:i:02:n:s0219091504000111

Ordering information: This journal article can be ordered from

DOI: 10.1142/S0219091504000111

Access Statistics for this article

Review of Pacific Basin Financial Markets and Policies (RPBFMP) is currently edited by Cheng-few Lee

More articles in Review of Pacific Basin Financial Markets and Policies (RPBFMP) from World Scientific Publishing Co. Pte. Ltd.
Bibliographic data for series maintained by Tai Tone Lim ().