The Dynamics of Ex-ante Weighted Spread: An Empirical Analysis

Georges Dionne () and Xiaozhou Zhou ()
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Xiaozhou Zhou: Universite du Quebec a Montreal - UQAM, Postal: 315, Ste-Catherine Street East, Montreal (Qc), Canada, H2X 3X2, http://finance.esg.uqam.ca/professeur?c=zhou.xiaozhou

No 16-4, Working Papers from HEC Montreal, Canada Research Chair in Risk Management

Abstract: We include trade matchedness to Limit Order Book (LOB) as an extended identification dimension of High Price Impact Trades (HPITs). HPITs are trades associated with disproportionately large price changes in comparison with their volume proportion and are related to informed trades. We show that the introduction of matchedness provides finer informed trading identification, and we find that a stronger presence of HPITs leads to a decline in volatility due to more contrarian informed trades, but this decline varies with information environments. Finally, we conclude that HPITs mainly reflect belief-based (fundamental-based) information in a high (low) public disclosure environment.

Keywords: Price efficiency; Price discovery; Limit Order Book; Trade size clustering; Stealth trading (search for similar items in EconPapers)
JEL-codes: C22 C41 C53 G11 (search for similar items in EconPapers)
Pages: 67 pages
Date: 2016-11-14, Revised 2019-11-04
New Economics Papers: this item is included in nep-mst
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Journal Article: The dynamics of ex-ante weighted spread: an empirical analysis (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:ris:crcrmw:2016_004

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