Information-based trading,price impact of trades,and trade autocorrelation |
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| Affiliation: | 1. Randolph-Macon College, Ashland, VA 23005, USA;2. Saint Anselm College, 205 Joseph Hall, 100 Saint Anselm Drive, Manchester, NH 03102, USA;3. Fox School of Business, Temple University, 1801 Liacouras Walk, 423 Alter Hall (006-01), Philadelphia, PA 19122, USA.;1. McDonough School of Business, Georgetown University, 3700 O St., Washington, DC 20057, USA;2. Goldyne and Irwin Hearsh Chair in Money and Banking, Anderson Graduate School of Management, University of California at Los Angeles, 110 Westwood Plaza, Los Angeles, CA 90095, USA |
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| Abstract: | In this study we show that both the price impact of trades and serial correlation in trade direction are positively and significantly related to the probability of information-based trading (PIN). The positive relation remains significant even after controlling for the effects of stock attributes. Higher trading activity (i.e., shorter intervals between trades) induces both larger price impact and stronger positive serial correlation in trade direction. The effect of time interval between trades on quote revision is stronger for stocks with higher PIN values. These results provide direct empirical support for the information models of trade and quote revision. |
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