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Information content of inter-trade time on the Chinese market

Tao Chen (), Jie Li and Jun Cai

Emerging Markets Review, 2008, vol. 9, issue 3, 174-193

Abstract: The microstructure literature offers contradicting predictions on the impact of inter-trade time on price change. In this paper, a vector autoregressive (VAR) model [Dufour, A. and Engle, R.F., 2000, Time and the price impact of a trade, Journal of Finance 55, 2467-2498.] is adopted to investigate this conflicting theory, using 180 composite stocks on the Shanghai Stock Exchange (SSE). We find evidence to support the significant role that time plays in both quote revision and signed trade equations, after controlling for time-of-day periodicities. Moreover, the information content of inter-trade time is found to be negatively correlated with proxies for the amount of private information available and positively correlated with time between trades.

Date: 2008
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