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Whose trades convey information? Evidence from a cross-section of traders

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Author Info
Menkhoff, Lukas
Schmeling, Maik

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Abstract

This paper contributes empirically to our understanding of informed traders. It analyzes traders' characteristics in an electronic limit order market via anonymous trader identities. We use six indicators of informed trading in a cross-sectional multivariate approach to identify traders with high price impact. More information is conveyed by those traders' trades who-simultaneously-use medium-sized orders (practice stealth trading), have large trading volume, are located in a financial center, trade early in the trading session, at times of wide spreads and when the order book is thin.

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Paper provided by Universität Hannover, Wirtschaftswissenschaftliche Fakultät in its series Diskussionspapiere der Wirtschaftswissenschaftlichen Fakultät der Universität Hannover with number dp-357.

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Length: 38 pages
Date of creation: Feb 2007
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Handle: RePEc:han:dpaper:dp-357

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Related research
Keywords: Market microstructure informed trading trade size foreign exchange

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Find related papers by JEL classification:
G12 - Financial Economics - - General Financial Markets - - - Asset Pricing
G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
F31 - International Economics - - International Finance - - - Foreign Exchange

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References listed on IDEAS
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