The Inter-Temporal Behavior of Informed and Uninformed Traders |
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Authors: | Brockman Paul Chung Dennis Y |
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Institution: | (1) Hong Kong Polytechnic University, Hung Hom, Hong Kong;(2) Hong Kong Polytechnic University, Hung Hom, Hong Kong |
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Abstract: | The purpose of this study is to investigate the inter-temporal trading behavior of informed and uninformed investors. We estimate a variation of the market microstructure model developed in Easley, Keifer, O'Hara, and Paperman (1996) and document the day-of-the-week pattern in informed and uninformed trading, as well as the probability of an information event and the probability of bad news. Using bootstrapped distributions, we show that the probability of trading against informed investors follows a U-shape pattern from Monday to Friday. Cross-sectional regression results suggest that inter-temporal patterns between informed and uninformed traders can generate observed patterns in liquidity provision costs. |
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Keywords: | informed trading uninformed trading market microstructure stock exchange of Hong Kong |
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