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Long-Lived Information and Intraday Patterns

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Author Info
Kerry Back (Washington University in St. Louis)
Hal Pedersen (University of Manitoba)
Abstract

This paper studies the effect of clustering of liquidity trades on intraday patterns of volatility and market depth when private information is long-lived. The assumption of long-lived information allows us to distinguish between the patterns of information arrival and information use. Our results are: (i) volatility follows the same pattern as liquidity trading, (ii) there are no systematic patterns in the price impacts of orders, and (iii) the timing of information arrival is is unimportant. Result (i) is the same as that obtained by Admati and Pfleiderer (1988) in a model of short-lived private information, but (ii) and (iii) are different.

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Publisher Info
Paper provided by EconWPA in its series Finance with number 9507009.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length: 28 pages
Date of creation: 17 Jul 1995
Date of revision:
Handle: RePEc:wpa:wuwpfi:9507009

Note: Type of Document - AMS-LaTeX; prepared on PC-TeX; pages: 28; figures: none. First submitted version.
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Web page: http://129.3.20.41

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Related research
Keywords: asymmetric information; Kyle models; market microstructure;

Find related papers by JEL classification:
G - Financial Economics

References listed on IDEAS
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.:

  1. Wood, Robert A & McInish, Thomas H & Ord, J Keith, 1985. " An Investigation of Transactions Data for NYSE Stocks," Journal of Finance, American Finance Association, vol. 40(3), pages 723-39, July. [Downloadable!] (restricted)
  2. Kyle, Albert S, 1985. "Continuous Auctions and Insider Trading," Econometrica, Econometric Society, vol. 53(6), pages 1315-35, November. [Downloadable!] (restricted)
  3. Harrison, J. Michael & Kreps, David M., 1979. "Martingales and arbitrage in multiperiod securities markets," Journal of Economic Theory, Elsevier, vol. 20(3), pages 381-408, June. [Downloadable!] (restricted)
  4. Foster, F Douglas & Viswanathan, S, 1993. " Variations in Trading Volume, Return Volatility, and Trading Costs: Evidence on Recent Price Formation Models," Journal of Finance, American Finance Association, vol. 48(1), pages 187-211, March. [Downloadable!] (restricted)
  5. Back, Kerry, 1992. "Insider Trading in Continuous Time," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 5(3), pages 387-409. [Downloadable!] (restricted)
  6. McInish, Thomas H & Wood, Robert A, 1992. " An Analysis of Intraday Patterns in Bid/Ask Spreads for NYSE Stocks," Journal of Finance, American Finance Association, vol. 47(2), pages 753-64, June. [Downloadable!] (restricted)
  7. Ananth Madhavan & Matthew Richardson & Mark Roomans, 1996. "Why Do Security Prices Change? A Transaction-Level Analysis of NYSE Stocks," New York University, Leonard N. Stern School Finance Department Working Paper Seires 96-34, New York University, Leonard N. Stern School of Business-.
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  8. Brock, William A. & Kleidon, Allan W., 1992. "Periodic market closure and trading volume : A model of intraday bids and asks," Journal of Economic Dynamics and Control, Elsevier, vol. 16(3-4), pages 451-489. [Downloadable!] (restricted)
  9. Anat R. Admati, Paul Pfleiderer, 1988. "A Theory of Intraday Patterns: Volume and Price Variability," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 1(1), pages 3-40. [Downloadable!] (restricted)
  10. Jain, Prem C. & Joh, Gun-Ho, 1988. "The Dependence between Hourly Prices and Trading Volume," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 23(03), pages 269-283, September. [Downloadable!]
  11. Grossman, Sanford J, 1981. "An Introduction to the Theory of Rational Expectations under Asymmetric Information," Review of Economic Studies, Blackwell Publishing, vol. 48(4), pages 541-59, October. [Downloadable!] (restricted)
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