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

  • Menkhoff, Lukas
  • Schmeling, Maik

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 Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät in its series Hannover Economic Papers (HEP) with number dp-357.

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