Transaction duration and asymmetric price impact of trades--Evidence from Australia
AbstractThis paper investigates the asymmetric price impact of buyer and seller initiated trades and the informational role of the trade duration. Using trade data from the Australian Stock Exchange (ASX), our results indicate that buyer initiated trades increase the ask price more than the bid price, and seller initiated trades decrease the bid price more than the ask price. The transaction duration is modeled in a Box-Cox ACD framework. The unexpected portion of the duration is found to play a more significant role in causing price impact in both purchases and sales than the expected duration. A trade shortly after the previous trade results in higher price impact than one after a long period. We found evidence that increased trading activity is associated with larger price impact, therefore implying a higher degree of information-based trading.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Empirical Finance.
Volume (Year): 18 (2011)
Issue (Month): 1 (January)
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Web page: http://www.elsevier.com/locate/jempfin
Duration Autoregressive duration model Price impact Error correction;
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