Time and the Price Impact of a Trade

Alfonso Dufour and Robert Engle

Journal of Finance, 2000, vol. 55, issue 6, 2467-2498

Abstract: We use Hasbrouck's (1991) vector autoregressive model for prices and trades to empirically test and assess the role played by the waiting time between consecutive transactions in the process of price formation. We find that as the time duration between transactions decreases, the price impact of trades, the speed of price adjustment to trade‐related information, and the positive autocorrelation of signed trades all increase. This suggests that times when markets are most active are times when there is an increased presence of informed traders; we interpret such markets as having reduced liquidity.

Date: 2000
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https://doi.org/10.1111/0022-1082.00297

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Working Paper: Time and the Price Impact of a Trade (1999)
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