Journal of Banking & Finance Vol. 29 No. 7 2005

Information-based trading, price impact of trades, and trade autocorrelation

Kee H. Chung¹; Mingsheng Li²; Thomas H. McInish³

¹ University at Buffalo, State University of New York · ² University of Louisiana at Monroe · ³ University of Memphis

Abstract

In this study we show that both the price impact of trades and serial correlation in trade direction are positively and significantly related to the probability of information-based trading (PIN). The positive relation remains significant even after controlling for the effects of stock attributes. Higher trading activity (i.e., shorter intervals between trades) induces both larger price impact and stronger positive serial correlation in trade direction. The effect of time interval between trades on quote revision is stronger for stocks with higher PIN values. These results provide direct empirical support for the information models of trade and quote revision.

DOI

10.1016/j.jbankfin.2004.08.001

Volume

29

Issue

7

Pages

1645-1669

Language

en

Sources

openalex crossref bibtex:phds-export.bib

Cite

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