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The Inter-temporal Behavior of Informed and Uninformed Traders

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  • Brockman, Paul
  • Chung, Dennis Y

Abstract

The purpose of this study is to investigate the inter-temporal trading behavior of informed and uninformed investors. We estimate a variation of the market microstructure model developed in Easley, Keifer, O'Hara, and Paperman (1996) and document the day-of-the-week pattern in informed and uninformed trading, as well as the probability of an information event and the probability of bad news. Using bootstrapped distributions, we show that the probability of trading against informed investors follows a U-shape pattern from Monday to Friday. Cross-sectional regression results suggest that inter-temporal patterns between informed and uninformed traders can generate observed patterns in liquidity provision costs. Copyright 2003 by Kluwer Academic Publishers

Suggested Citation

  • Brockman, Paul & Chung, Dennis Y, 2003. "The Inter-temporal Behavior of Informed and Uninformed Traders," Review of Quantitative Finance and Accounting, Springer, vol. 21(3), pages 251-265, November.
    • Handle: RePEc:kap:rqfnac:v:21:y:2003:i:3:p:251-65
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    Cited by:

    1. Vinay Datar & Raymond So & Yiuman Tse, 2008. "Liquidity commonality and spillover in the US and Japanese markets: an intraday analysis using exchange-traded funds," Review of Quantitative Finance and Accounting, Springer, vol. 31(4), pages 379-393, November.
    2. Man Jin & Huiting Tian & Subal C. Kumbhakar, 2020. "How to survive and compete: the impact of information asymmetry on productivity," Journal of Productivity Analysis, Springer, vol. 53(1), pages 107-123, February.
    3. Jalilvand, Abolhassan & Noroozabad, Mojtaba Rostami & Switzer, Jeannette, 2018. "Informed and uninformed investors in Iran: Evidence from the Tehran Stock Exchange," Journal of Economics and Business, Elsevier, vol. 95(C), pages 47-58.
    4. Narjess Boubakri & Sadok El Ghoul & Omrane Guedhami & Anis Samet, "undated". "The Effects of Analyst Forecast Properties on the Cost of Debt: International Evidence," Finance Working Papers 15-12/2013, School of Business Administration, American University of Sharjah.

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