This paper studies the effect of investor's bounded rationality on market dynamics. In an order driven market, we consider a few-types model where two risky assets are exchanged. Agents differ by their behavior, knowledge, risk aversion and investment horizon. The investor's demand is defined by...

This paper examines whether NASDAQ dealers' preopening quotes might be related to non-fundamental information, that is, information about transient trading pressure unrelated to fundamentals. Preopening quotes posted by wholesalers (dealers specialized in market-making and thus presumably more...

We propose and study a simple stochastic model for the dynamics of a limit order book, in which arrivals of market order, limit orders and order cancellations are described in terms of a Markovian queueing system. Through its analytical tractability, the model allows to obtain analytical...

To execute a trade, participants in electronic equity markets may choose to submit limit orders or market orders across various exchanges where a stock is traded. This decision is influenced by the characteristics of the order flow and queue sizes in each limit order book, as well as the...

We show that the distribution of trading volume in call auctions is indicative of the proportion of informed trade. We use the Kyle (1985) model to predict the shape of the volume distribution as a function of the proportion of informed trade. If most liquidity demanders are uninformed, there is...

The efficient frontier is a core concept in Modern Portfolio Theory. Based on this idea, we will construct optimal trading curves for different types of portfolios. These curves correspond to the algorithmic trading strategies that minimize the expected transaction costs, i.e. the joint effect...

We propose and study a simple stochastic model for the dynamics of a limit order book, in which arrivals of market order, limit orders and order cancellations are described in terms of a Markovian queueing system. Through its analytical tractability, the model allows to obtain analytical...