Economics at your fingertips  

The Validity of Models on the Information Content of Trades

Leif Brandes, Egon Franck and Erwin Verbeek ()
Additional contact information
Erwin Verbeek: Institute for Strategy and Business Economics, University of Zurich

No 120, Working Papers from University of Zurich, Institute for Strategy and Business Economics (ISU)

Abstract: Measuring the (private) information content of stock trades is an important topic in market microstructure research. A common problem of stock markets is that it is ex-ante not possible to separate phases where the scope for asymmetric information is likely to be broader from those, where there is less exposure to traders with superior information. Such a distinction is needed to directly test the reliability of the proposed measures. This paper applies a unique data set from the betting market to provide such a direct test. We exploit the fact that betting occurs preplay, i.e. before match start, as well as inplay. We test the hypothesis that measures of private information will be less pronounced for inplay betting quotations (where all actions on the court are publicly observable, and trading on private information is unlikely) than for preplay betting quotations. Based on more than 23,000 transactions for the 2008 Wimbledon final, and five additional matches, we present first empirical support for this relation.

Keywords: betting; market microstructure; asymmetric information; vector autoregressive model (search for similar items in EconPapers)
JEL-codes: C33 G14 G17 (search for similar items in EconPapers)
Pages: 33
Date: 2009, Revised 2010
New Economics Papers: this item is included in nep-cta and nep-mst
References: View references in EconPapers View complete reference list from CitEc

Downloads: (external link) First version, 2009 (application/pdf)

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:

Access Statistics for this paper

More papers in Working Papers from University of Zurich, Institute for Strategy and Business Economics (ISU) Contact information at EDIRC.
Bibliographic data for series maintained by IBW IT ().

Page updated 2024-04-22
Handle: RePEc:iso:wpaper:0120