High price impact trades identication and its implication for volatility and price efficiency

Georges Dionne () and Xiaozhou Zhou ()
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Xiaozhou Zhou: University of Quebec at Montreal

No 24-3, Working Papers from HEC Montreal, Canada Research Chair in Risk Management

Abstract: We include Limit Order Book (LOB) matchedness as a new trade attribute to identify High Price Impact Trades (HPITs). HPITs are trades associated with large price changes relative to their volume proportion. We show that the inclusion of matchedness provides a finer analysis of the relationship between price contribution and trade categories. We further verify that a stronger presence of HPITs leads to a decline in volatility and improves price efficiency, which suggests a link between HPITs and informed trades.

Keywords: Matched trades; limit order book; price efficiency; price discovery (search for similar items in EconPapers)
JEL-codes: D40 D80 D82 G14 (search for similar items in EconPapers)
Pages: 48 pages
Date: 2024-10-20
New Economics Papers: this item is included in nep-mst
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Persistent link: https://EconPapers.repec.org/RePEc:ris:crcrmw:2024_003

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