The Other Side of the Trading Story: Evidence from NYSE
AbstractWe analyse the well-known TORQ dataset of trades on the NYSE over a 3-month period, breaking down transactions depending on whether the active or passive side was institutional or private. This allows us to compare the returns on the different trade categories. We find that, however we analyse the results, institutions are best informed, and earn highest returns when trading with individuals as counter party. We also confirm the conclusions found elsewhere in the literature that informed traders often place limit orders, especially towards the end of the day (as predicted on the basis of laboratory experiments in Bloomfield, O.Hara, and Saar (2005)). Finally, we find that trading between institutions accounts for the bulk of trading volume, but carries little information and seems to be largely liquidity-driven.
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Bibliographic InfoPaper provided by Cardiff University, Cardiff Business School, Economics Section in its series Cardiff Economics Working Papers with number E2008/12.
Length: 24 pages
Date of creation: Jul 2008
Date of revision:
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More information through EDIRC
liquidity trade; informed trades;
Find related papers by JEL classification:
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-07-30 (All new papers)
- NEP-FMK-2008-07-30 (Financial Markets)
- NEP-MST-2008-07-30 (Market Microstructure)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hasbrouck, Joel, 1991. " Measuring the Information Content of Stock Trades," Journal of Finance, American Finance Association, vol. 46(1), pages 179-207, March.
- Sanford J Grossman & Joseph E Stiglitz, 1997.
"On the Impossibility of Informationally Efficient Markets,"
Levine's Working Paper Archive
1908, David K. Levine.
- Grossman, Sanford J & Stiglitz, Joseph E, 1980. "On the Impossibility of Informationally Efficient Markets," American Economic Review, American Economic Association, vol. 70(3), pages 393-408, June.
- Lee, Yi-Tsung & Lin, Ji-Chai & Liu, Yu-Jane, 1999. "Trading patterns of big versus small players in an emerging market: An empirical analysis," Journal of Banking & Finance, Elsevier, vol. 23(5), pages 701-725, May.
- Lee, Charles M C & Ready, Mark J, 1991. " Inferring Trade Direction from Intraday Data," Journal of Finance, American Finance Association, vol. 46(2), pages 733-46, June.
- David Easley & Maureen O'hara, 2004. "Information and the Cost of Capital," Journal of Finance, American Finance Association, vol. 59(4), pages 1553-1583, 08.
- Hasbrouck, Joel, 1991. "The Summary Informativeness of Stock Trades: An Econometric Analysis," Review of Financial Studies, Society for Financial Studies, vol. 4(3), pages 571-95.
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