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Stealth trading: The case of the Tokyo Stock Exchange

Author

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  • Ascioglu, Asli
  • Comerton-Forde, Carole
  • McInish, Thomas H.

Abstract

The stealth trading hypothesis asserts that informed traders trade strategically by breaking up their orders so as to more easily hide among the liquidity traders. Using data for the Tokyo Stock Exchange (TSE), a pure order-driven market, we find evidence that price changes are driven by small- and medium-size trades, with small trades making the greatest contribution to price change relative to their contribution to trading volume. We also find that large trades explain a greater portion of the cumulative price change on high volatility days. Hence, our results support the stealth trading hypothesis for the TSE.

Suggested Citation

  • Ascioglu, Asli & Comerton-Forde, Carole & McInish, Thomas H., 2011. "Stealth trading: The case of the Tokyo Stock Exchange," Pacific-Basin Finance Journal, Elsevier, vol. 19(2), pages 194-207, April.
  • Handle: RePEc:eee:pacfin:v:19:y:2011:i:2:p:194-207
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    References listed on IDEAS

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    1. Chakravarty, Sugato, 2001. "Stealth-trading: Which traders' trades move stock prices?," Journal of Financial Economics, Elsevier, vol. 61(2), pages 289-307, August.
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    9. Comerton-Forde, Carole & Rydge, James, 2006. "The current state of Asia-Pacific stock exchanges: A critical review of market design," Pacific-Basin Finance Journal, Elsevier, pages 1-32.
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    Citations

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    Cited by:

    1. Tsai, Shih-Chuan, 2013. "Investors' information advantage and order choices in an order-driven market," Pacific-Basin Finance Journal, Elsevier, pages 932-951.
    2. Abad, David & Pascual, Roberto, 2015. "The friction-free weighted price contribution," International Review of Economics & Finance, Elsevier, vol. 37(C), pages 226-239.
    3. Linnenluecke, Martina K. & Chen, Xiaoyan & Ling, Xin & Smith, Tom & Zhu, Yushu, 2016. "Emerging trends in Asia-Pacific finance research: A review of recent influential publications and a research agenda," Pacific-Basin Finance Journal, Elsevier, pages 66-76.
    4. Hung, Pi-Hsia, 2016. "Investor sentiment, order submission, and investment performance on the Taiwan Stock Exchange," Pacific-Basin Finance Journal, Elsevier, pages 124-140.

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