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Market Sidedness: Insights into Motives for Trade Initiation

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  • ASANI SARKAR
  • ROBERT A. SCHWARTZ

Abstract

We infer motives for trade initiation from market sidedness. We define trading as more two‐sided (one‐sided) if the correlation between the number of buyer‐ and seller‐initiated trades increases (decreases), and assess changes in sidedness (relative to a control sample) around events that identify trade initiators. Consistent with asymmetric information, trading is more one‐sided before merger news. Consistent with belief heterogeneity, trading is more two‐sided before earnings and macro announcements with greater dispersion in analyst forecasts, and after news with larger announcement surprises. We examine the codeterminacy of sidedness, bid‐ask spread, volatility, number of trades, and order imbalance.

Suggested Citation

  • Asani Sarkar & Robert A. Schwartz, 2009. "Market Sidedness: Insights into Motives for Trade Initiation," Journal of Finance, American Finance Association, vol. 64(1), pages 375-423, February.
  • Handle: RePEc:bla:jfinan:v:64:y:2009:i:1:p:375-423
    DOI: 10.1111/j.1540-6261.2008.01437.x
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    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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