Trade Duration: Information and Trade Disposition

Peter R. Locke and Zhan Onayev

The Financial Review, 2005, vol. 40, issue 1, 113-129

Abstract: We examine the relation between futures trade duration and profitability, volatility, and volume. The duration of unprofitable trades is longer than that for profitable trades across the day, which is evidence of the disposition effect. Our analysis of profitable and unprofitable trades shows strong intraday volume patterns. Greater proportions of profitable trades are offset at the open and close. During high‐volume periods dealers may use a semi‐fundamental informational advantage, based on their access to order flow signals. Dealers may be able to execute costly inventory‐reducing trades at the end of the day, when their informational advantage is perhaps greatest.

Date: 2005
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