Journal of Financial Economics Vol. 120 No. 2 2016
Discerning information from trade data
Abstract
How best to discern trading intentions from market data? We examine the accuracy of three methods for classifying trade data: bulk volume classification (BVC), tick rule and aggregated tick rule. We develop a Bayesian model of inferring information from trade executions and show the conditions under which tick rules or bulk volume classification predominates. Empirically, we find that tick rule approaches and BVC are relatively good classifiers of the aggressor side of trading, but bulk volume classifications are better linked to proxies of information-based trading. Thus, BVC would appear to be a useful tool for discerning trading intentions from market data.
- DOI
- 10.1016/j.jfineco.2016.01.018
- Volume
- 120
- Issue
- 2
- Pages
- 269-285
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref