EconPapers    
Economics at your fingertips  
 

How noise trading affects informational efficiency: Evidence from an order-driven market

Chris H. Zhang and Petko S. Kalev

Pacific-Basin Finance Journal, 2021, vol. 68, issue C

Abstract: We use full order book data from the Australian Securities Exchange to investigate how noise trading affects informational efficiency of securities prices. In aggregate, noise trading harms price efficiency. However, this is driven mainly by higher levels of noise trading, indicating a non-linear effect. Further, behind the aggregate effects lies rich heterogeneity in how noise trading affects informational efficiency cross-sectionally. Noise trading harms informational efficiency of large and liquid stocks but can be beneficial in small and illiquid stocks, indicating that noise trading affects different stocks differently.

Keywords: Market microstructure; Noise trading; Belief dispersion; Informational efficiency (search for similar items in EconPapers)
JEL-codes: G14 G18 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0927538X21001128
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:68:y:2021:i:c:s0927538x21001128

DOI: 10.1016/j.pacfin.2021.101605

Access Statistics for this article

Pacific-Basin Finance Journal is currently edited by K. Chan and S. Ghon Rhee

More articles in Pacific-Basin Finance Journal from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

 
Page updated 2022-01-04
Handle: RePEc:eee:pacfin:v:68:y:2021:i:c:s0927538x21001128