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Trade Size And Informed Trading: Which Trades Are "Big"?


  • Frank Heflin
  • Kenneth W. Shaw


We find adverse-selection spread components increase sharply in the ratio of trade size to quoted depth, and spike when trade size equals quoted depth. We find that two previously documented and prominent indicators of informed trading, raw trade size and high-trading volume half-hours, offer almost no explanatory power for informed trading measures beyond trade size to quoted depth, and a third indicator, time of day, offers no explanatory power among trades with high trade size to quoted depth. Our results suggest trade size to quoted depth is perhaps the single most important indicator that a trade is informed. 2005 The Southern Finance Association and the Southwestern Finance Association.

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  • Frank Heflin & Kenneth W. Shaw, 2005. "Trade Size And Informed Trading: Which Trades Are "Big"?," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 28(1), pages 133-163.
  • Handle: RePEc:bla:jfnres:v:28:y:2005:i:1:p:133-163

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    References listed on IDEAS

    1. Kenneth A. Kavajecz, "undated". "A Specialist's Quoted Depth as a Strategic Choice Variable," Rodney L. White Center for Financial Research Working Papers 12-96, Wharton School Rodney L. White Center for Financial Research.
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    Cited by:

    1. Wang, Zi-Mei & Chiao, Chaoshin & Chang, Ya-Ting, 2012. "Technical analyses and order submission behaviors: Evidence from an emerging market," International Review of Economics & Finance, Elsevier, vol. 24(C), pages 109-128.
    2. Frank Heflin & Kenneth W. Shaw & John J. Wild, 2007. "Disclosure policy and intraday spread patterns," Review of Accounting and Finance, Emerald Group Publishing, vol. 6(3), pages 285-303, August.

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