EconPapers    
Economics at your fingertips  
 

Inferring the private information content of trades: a regime-switching approach The views presented in the paper are not necessarily shared by the European Central Bank

Ken Nyholm
Additional contact information
Ken Nyholm: European Central Bank, Risk Management Division, Kaiserstrasse 29 D-60311 Frankfurt am Main, Germany, Postal: European Central Bank, Risk Management Division, Kaiserstrasse 29 D-60311 Frankfurt am Main, Germany

Journal of Applied Econometrics, 2003, vol. 18, issue 4, 457-470

Abstract: This paper presents an empirical model for inferring the private information content of trades at the transaction level. The trade-indicator model of Glosten and Harris (1988) is extended to a two-state regime-switching setting, and the model is estimated using tick-by-tick data from the New York Stock Exchange (NYSE). The specialist is found to react in accordance with the proposed model. Bid-ask quotes set after the execution of a trade reflect the conjectured information content of that particular trade. Based on the estimated model four empirical results emerge: (a) the suggested regime-switching model fit data well; (b) the reverse J-shaped pattern of intra-daily quoted spreads is shown to agree with the clustering of costs incurred by the specialist through trading with better-informed agents; (c) on average 9% of all trades are found to reveal private: information to the specialist; (d) results regarding the trading volume of informed traders support the stealth trading hypothesis suggested by Barclay and Warner (1993). Copyright © 2003 John Wiley & Sons, Ltd.

Date: 2003
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://hdl.handle.net/10.1002/jae.707 Link to full text; subscription required (text/html)
http://qed.econ.queensu.ca:80/jae/2003-v18.4/ Supporting data files and programs (text/html)

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:jae:japmet:v:18:y:2003:i:4:p:457-470

Ordering information: This journal article can be ordered from
http://www3.intersci ... e.jsp?issn=0883-7252

DOI: 10.1002/jae.707

Access Statistics for this article

Journal of Applied Econometrics is currently edited by M. Hashem Pesaran

More articles in Journal of Applied Econometrics from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley-Blackwell Digital Licensing () and Christopher F. Baum ().

 
Page updated 2025-03-19
Handle: RePEc:jae:japmet:v:18:y:2003:i:4:p:457-470