Strategic Cross-Trading in the U.S. Stock Market

Paolo Pasquariello and Clara Vega

Review of Finance, 2015, vol. 19, issue 1, 229-282

Abstract: We model and test for the role of heterogeneously informed, strategic multi-asset speculation for cross-price impact—the impact of trades in one asset on the prices of other (even unrelated) assets—in the U.S. stock market. Our investigation of the trading activity in New York Stock Exchange (NYSE) and National Association of Securities Dealers Automated Quotation System (NASDAQ) stocks between 1993 and 2004 reveals that, consistent with our model, (1) daily order imbalance in one industry or random stock has a significant, persistent, and robust impact on daily returns of other (even unrelated) industries or random stocks; (2) cross-price impact is often negative; and (3) both direct (i.e., an asset’s own) and absolute (i.e., unsigned) cross-price impact are smaller when speculators are more numerous, greater when market-wide dispersion of beliefs is higher, and greater among stocks dealt by the same specialist.

Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

Downloads: (external link)
http://hdl.handle.net/10.1093/rof/rft055 (application/pdf)
Access to full text is restricted to subscribers.

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:oup:revfin:v:19:y:2015:i:1:p:229-282.

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

Review of Finance is currently edited by Marcin Kacperczyk

More articles in Review of Finance from European Finance Association Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK. Contact information at EDIRC.
Bibliographic data for series maintained by Oxford University Press ().