The role of trading intensity estimating the implicit bid–ask spread and determining transitory effects
AbstractIn this paper, we investigate the information content of trading intensity applying the Madhavan, Richardson and Roomans (1997) structural model to express trading intensity as trading momentum in duration and volume. Using both transactions and intraday data from the Helsinki Stock Exchange Limit Order Bookmarket, we find that momentum in duration and volume enhances the information effect. We reach this conclusion based on the parametric effect determined by the sign and the magnitude of the coefficients associated with the trading intensity variables, the trading effect determined by the ratio of transitory effects to permanent effects, and the economic effect determined by the size of the implicit bid–ask spread. While we find that the implicit bid–ask spread and transitory effects are decreasing toward the end of the trading day in consistency with information models in the literature, there is a surge of trades at the market close, most probably due to information uncertainty at market opening in New York.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal International Review of Financial Analysis.
Volume (Year): 20 (2011)
Issue (Month): 5 ()
Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/620166
Trading intensity; Bid–ask spread; ACD; Duration; Volume;
Find related papers by JEL classification:
- G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Bowe, Michael & Hyde, Stuart & McFarlane, Lavern, 2013. "Duration, trading volume and the price impact of trades in an emerging futures market," Emerging Markets Review, Elsevier, vol. 17(C), pages 89-105.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.