The Price Impact of Stock Trades: Evidence from the Prague Stock Exchange

Vit Bubak and Filip Žikeš (zikesf@yahoo.com)
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Filip Žikeš: Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic, http://ies.fsv.cuni.cz/

No 2006/19, Working Papers IES from Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies

Abstract: Using high-frequency trade and quote data from the Prague Stock Exchange, this paper investigates the price impact of stock trades using a vector autoregressive model. We find that (a) full impact of a trade on the security price is not felt instantaneously but a with a protracted lag, (b) as a function of trade innovation size, the ultimate impact of the innovation on the quote is non-linear, positive, increasing, and convex, and (c) there is a significant causal pattern (acc. to Grange-Sims) running from lagged quote revisions to trades as well as from trades to quote revisions.

Keywords: vector autoregressive model; market microstructure; price impact of stock trades (search for similar items in EconPapers)
JEL-codes: G14 G18 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2006-04, Revised 2006-04
New Economics Papers: this item is included in nep-mst
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