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The Price Impact of Stock Trades: Evidence from the Prague Stock Exchange

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Author Info
Vít Bubák () (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)
Filip Žikeš () (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic, Institute of Information Theory and Automation, Academy of Sciences of the Czech Republic, Prague, Czech Republic)

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Abstract

Using high-frequency trade and quote data from the Prague Stock Exchange, this paper investigates the price impact of stock trades using a vector autoregressive model. We find that (a) full impact of a trade on the security price is not felt instantaneously but a with a protracted lag, (b) as a function of trade innovation size, the ultimate impact of the innovation on the quote is non-linear, positive, increasing, and convex, and (c) there is a significant causal pattern (acc. to Grange-Sims) running from lagged quote revisions to trades as well as from trades to quote revisions.

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Publisher Info
Paper provided by Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies in its series Working Papers IES with number 2006/19.

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Length: 22 pages
Date of creation: Apr 2006
Date of revision: Apr 2006
Handle: RePEc:fau:wpaper:wp2006_19

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Related research
Keywords: vector autoregressive model; market microstructure; price impact of stock trades;

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Find related papers by JEL classification:
G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies
G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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  1. Petr Kadeřábek, 2006. "Correcting Predictive ModelCorrecting Models of Chaotic Reality," Working Papers IES 2006/31, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Dec 2006. [Downloadable!]
  2. Lukáš Vácha & Miloslav Vošvrda, 2006. "Wavelet Applications to Heterogeneous Agents Model," Working Papers IES 2006/21, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Apr 2006. [Downloadable!]
  3. Wadim Strielkowski, 2006. "People of the Road: the Role of Ethnic Origin in Migration Decisions. A Study of Slovak Roma Asylum-Seekers in the Czech Republic in 1998-2006," Working Papers IES 2006/32, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Dec 2006. [Downloadable!]
  4. Karel Janda, 2006. "Lender and Borrower as Principal and Agent," Working Papers IES 2006/24, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Jul 2006. [Downloadable!]
  5. Pavel Körner, 2006. "The determinants of corporate debt maturity structure: evidence from Czech firms," Working Papers IES 2006/27, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Oct 2006. [Downloadable!]
  6. František Turnovec, 2006. "Publication Portfolio of the Czech Economists and Problems of Rankings," Working Papers IES 2006/30, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Dec 2006. [Downloadable!]
  7. Natálie Reichlová & Petr Švarc, 2006. "Strategic Referring in Labor Market Social Networks," Working Papers IES 2006/29, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Dec 2006. [Downloadable!]
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