Whose trades convey information? Evidence from a cross-section of traders |
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Authors: | Lukas Menkhoff Maik Schmeling |
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Institution: | Department of Economics, Leibniz Universität Hannover, Königsworther Platz 1, D-30167 Hannover, Germany |
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Abstract: | This paper contributes empirically to our understanding of informed traders. It analyzes traders’ characteristics in a foreign exchange electronic limit order market via anonymous trader identities. We use six indicators of informed trading in a cross-sectional multivariate approach to identify traders with high price impact. More information is conveyed by those traders’ trades which—simultaneously—use medium-sized orders (practice stealth trading), have large trading volume, are located in a financial center, trade early in the trading session, at times of wide spreads and when the order book is thin. |
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