Nonlinear ACD Model and Informed Trading: Evidence from Shanghai Stock Exchange
AbstractDufour and Engle (J. Finance (2000) 2467) find evidence of an increased presence of informed traders when the NYSE markets are most active. No such evidence, however, can be found by Manganelli (J. Financial Markets (2005) 377) for the infrequently traded stocks. In this paper, we fit a nonlinear log-ACD model to stocks listed on Shanghai Stock Exchange. When trading volume is high, empirical findings suggest presence of informed trading in both liquid and illiquid stocks. When volume is low, market activity is likely due to liquidity trading. Finally, for the actively traded stocks, our results support the price formation model of Foster and Viswanathan (Rev. Financial Studies (1990) 593).
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Bibliographic InfoPaper provided by Cardiff University, Cardiff Business School, Economics Section in its series Cardiff Economics Working Papers with number E2008/8.
Length: 31 pages
Date of creation: Apr 2008
Date of revision:
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Informed trading; Liquidity trading; Duration; Volume; Volatility;
Find related papers by JEL classification:
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-05-05 (All new papers)
- NEP-IFN-2008-05-05 (International Finance)
- NEP-MST-2008-05-05 (Market Microstructure)
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