Equilibrium in a dynamic limit order market

• 成果类型: Article
• 署名作者: Goettler, RL; Parlour, CA; Rajan, U
• 署名单位: Carnegie Mellon University; University of Michigan System; University of Michigan
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/j.1540-6261.2005.00795.x
• 发表日期: 2005
• 页码: 2149-2192
• 关键词: Liquidity provision; empirical-analysis; execution costs; paris; price; book; SIXTEENTHS; QUALITY; trades

摘要

We model a dynamic limit order market as a stochastic sequential game with rational traders. Since the model is analytically intractable, we provide an algorithm based on Pakes and McGuire (2001) to find a stationary Markov-perfect equilibrium. We then generate artificial time series and perform comparative dynamics. Conditional on a transaction, the midpoint of the quoted prices is not a good proxy for the true value. Further, transaction costs paid by market order submitters are negative on average, and negatively correlated with the effective spread. Reducing the tick size is not Pareto improving but increases total investor surplus.