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Considering all microstructure effects: The extension of a trade indicator model

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  • Ryu, Doojin

Abstract

By considering various market microstructure effects, this letter proposes a comprehensive trade indicator model incorporating trade duration, order sizes, bid–ask spreads, and market depth into a unified framework. Examining the intraday price behavior of the KOSPI200 futures market, we find that (i) fast trading indicates informed trading, (ii) stealth trading does not prevail, (iii) order-processing costs reach economies of scale, and (iv) liquidity significantly affects investors’ order submission decisions in the highly liquid market.

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  • Ryu, Doojin, 2016. "Considering all microstructure effects: The extension of a trade indicator model," Economics Letters, Elsevier, vol. 146(C), pages 107-110.
  • Handle: RePEc:eee:ecolet:v:146:y:2016:i:c:p:107-110
    DOI: 10.1016/j.econlet.2016.07.025
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    References listed on IDEAS

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    1. Grammig, Joachim & Theissen, Erik & Wuensche, Oliver, 2007. "Time and price impact of a trade: A structural approach," CFR Working Papers 07-12, University of Cologne, Centre for Financial Research (CFR).
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    3. Chung, Kee H. & Park, Seongkyu “Gilbert” & Ryu, Doojin, 2016. "Trade duration, informed trading, and option moneyness," International Review of Economics & Finance, Elsevier, vol. 44(C), pages 395-411.
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    9. Kyle, Albert S, 1985. "Continuous Auctions and Insider Trading," Econometrica, Econometric Society, vol. 53(6), pages 1315-1335, November.
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    11. Timotheos Angelidis & Alexandros Benos, 2009. "The Components of the Bid‐Ask Spread: the Case of the Athens Stock Exchange," European Financial Management, European Financial Management Association, vol. 15(1), pages 112-144, January.
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    Citations

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    Cited by:

    1. Jieun Lee & Doojin Ryu, 2019. "The impacts of public news announcements on intraday implied volatility dynamics," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 39(6), pages 656-685, June.
    2. Chune Young Chung & Yunjae Lee & Doojin Ryu, 2017. "Do Domestic Institutional Trades Exacerbate Information Asymmetry? Evidence from the Korean Stock Market," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 24(4), pages 309-322, December.
    3. Ryu, Doojin & Yang, Heejin, 2017. "Price disagreements and adjustments in index derivatives markets," Economics Letters, Elsevier, vol. 151(C), pages 104-106.
    4. Doojin Ryu & Heejin Yang, 2018. "The directional information content of options volumes," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 38(12), pages 1533-1548, December.
    5. Yang, Heejin & Kutan, Ali M. & Ryu, Doojin, 2019. "Volatility information trading in the index options market: An intraday analysis," International Review of Economics & Finance, Elsevier, vol. 64(C), pages 412-426.
    6. Hyeongjun Kim & Hoon Cho & Doojin Ryu, 2018. "Characteristics of Mortgage Terminations: an Analysis of a Loan-Level Dataset," The Journal of Real Estate Finance and Economics, Springer, vol. 57(4), pages 647-676, November.
    7. Lee, Jaeram & Lee, Geul & Ryu, Doojin, 2018. "Difference in the intraday return-volume relationships of spots and futures: A quantile regression approach," Economics Discussion Papers 2018-68, Kiel Institute for the World Economy (IfW).
    8. Doojin RYU & Hyein SHIM, 2017. "Intraday Dynamics of Asset Returns, Trading Activities, and Implied Volatilities: A Trivariate GARCH Framework," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 45-61, June.
    9. Doojin Ryu, 2017. "Comprehensive market microstructure model: considering the inventory holding costs," Journal of Business Economics and Management, Taylor & Francis Journals, vol. 18(2), pages 183-201, March.
    10. Doojin Ryu & Doowon Ryu & Heejin Yang, 2021. "The impact of net buying pressure on index options prices," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 41(1), pages 27-45, January.
    11. Lee, Jaeram & Ryu, Doojin & Yang, Heejin, 2021. "Does vega-neutral options trading contain information?," Journal of Empirical Finance, Elsevier, vol. 62(C), pages 294-314.
    12. Doojin Ryu & Jinyoung Yu, 2021. "Informed options trading around holidays," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 41(5), pages 658-685, May.
    13. Lee, Jieun & Ryu, Doojin, 2019. "How does FX liquidity affect the relationship between foreign ownership and stock liquidity?," Emerging Markets Review, Elsevier, vol. 39(C), pages 101-119.

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    More about this item

    Keywords

    Market microstructure; Trade indicator model; Futures market;
    All these keywords.

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G19 - Financial Economics - - General Financial Markets - - - Other

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