Inferring Trade Direction from Intraday Data

Charles M. C. Lee; Mark J. Ready

doi:10.1111/j.1540-6261.1991.tb02683.x

Journal of Finance Vol. 46 No. 2 1991

Inferring Trade Direction from Intraday Data

Charles M. C. Lee^1,2; Mark J. Ready^3,1,4,2

¹ University of Wisconsin–Madison · ² University of Michigan–Ann Arbor · ³ United States Securities and Exchange Commission · ⁴ Cornell University

Abstract

This paper evaluates alternative methods for classifying individual trades as market buy or market sell orders using intraday trade and quote data. We document two potential problems with quote‐based methods of trade classification: quotes may be recorded ahead of trades that triggered them, and trades inside the spread are not readily classifiable. These problems are analyzed in the context of the interaction between exchange floor agents. We then propose and test relatively simple procedures for improving trade classifications.

DOI: 10.1111/j.1540-6261.1991.tb02683.x
Volume: 46
Issue: 2
Pages: 733-746
Language: en
Sources: openalex crossref

Inferring Trade Direction from Intraday Data

Abstract

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