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Trade Duration: Information and Trade Disposition

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  • Peter R. Locke
  • Zhan Onayev

Abstract

We examine the relation between futures trade duration and profitability, volatility, and volume. The duration of unprofitable trades is longer than that for profitable trades across the day, which is evidence of the disposition effect. Our analysis of profitable and unprofitable trades shows strong intraday volume patterns. Greater proportions of profitable trades are offset at the open and close. During high‐volume periods dealers may use a semi‐fundamental informational advantage, based on their access to order flow signals. Dealers may be able to execute costly inventory‐reducing trades at the end of the day, when their informational advantage is perhaps greatest.

Suggested Citation

  • Peter R. Locke & Zhan Onayev, 2005. "Trade Duration: Information and Trade Disposition," The Financial Review, Eastern Finance Association, vol. 40(1), pages 113-129, February.
    • Handle: RePEc:bla:finrev:v:40:y:2005:i:1:p:113-129
    DOI: 10.1111/j.0732-8516.2005.00095.x
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    References listed on IDEAS

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    Cited by:

    1. Lei Feng & Mark Seasholes, 2005. "Do Investor Sophistication and Trading Experience Eliminate Behavioral Biases in Financial Markets?," Review of Finance, Springer, vol. 9(3), pages 305-351, September.
    2. Vassilis A. Efthymiou & George N. Leledakis, 2014. "The price impact of the disposition effect on the ex-dividend day of NYSE and AMEX common stocks," Quantitative Finance, Taylor & Francis Journals, vol. 14(4), pages 711-724, April.
    3. Weber, Martin & Welfens, Frank, 2007. "An Individual Level Analysis of the Disposition Effect: Empirical and Experimental Evidence," Sonderforschungsbereich 504 Publications 07-45, Sonderforschungsbereich 504, Universität Mannheim;Sonderforschungsbereich 504, University of Mannheim.
    4. Shi-Woei Lin & Hui-Lung Huang, 2007. "Agent-Based Modeling To Investigate The Disposition Effect In Financial Markets," Portuguese Journal of Management Studies, ISEG, Universidade de Lisboa, vol. 0(2), pages 145-163.
    5. Jeffrey R. Black & Pankaj K. Jain & Wei Sun, 2023. "Trade-time clustering," Review of Quantitative Finance and Accounting, Springer, vol. 60(3), pages 1209-1242, April.

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