Which trades move stock prices on Euronext Paris?

Waël Louhichi ()
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Waël Louhichi: University of Rennes 1

Journal of Asset Management, 2010, vol. 10, issue 6, No 4, 382-391

Abstract: Abstract The aim of this article is to shed light on the relationship between buy/sell imbalances and daily stock returns for the CAC 40 stocks. Using detailed intraday data from Euronext Paris, we find a weak positive relation between directional trades of the whole market and the current individual stock returns. We distinguish between trades initiated by large orders and trades initiated by small orders. Results reveal a strong positive relation between daily returns and the direction of trades initiated by large orders, that is, increases in stock prices occur during periods of high-buying activity and stock prices decreases are accompanied by selling imbalances. The above relation becomes negative if we consider only trades initiated by small orders. Our empirical evidence indicates that small orders are submitted by noise traders, and that large orders are strongly associated with stock price movements. Finally, our findings are consistent with the absence of inventory control phenomenon on Euronext Paris. Indeed, there is no significant relation between stock returns and lagged imbalances.

Keywords: stock returns; directional trades; order size; market efficiency; market microstructure; Euronext (search for similar items in EconPapers)
Date: 2010
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DOI: 10.1057/jam.2009.18

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