Abstract
In this study we show that both the price impact of trades and serial correlation in trade direction are positively and significantly related to the probability of information-based trading (PIN). The positive relation remains significant even after controlling for the effects of stock attributes. Higher trading activity (i.e., shorter intervals between trades) induces both larger price impact and stronger positive serial correlation in trade direction. The effect of time interval between trades on quote revision is stronger for stocks with higher PIN values. These results provide direct empirical support for the information models of trade and quote revision.
| Original language | English |
|---|---|
| Pages (from-to) | 1645-1669 |
| Number of pages | 25 |
| Journal | Journal of Banking and Finance |
| Volume | 29 |
| Issue number | 7 |
| DOIs | |
| State | Published - Jul 2005 |
Keywords
- Asymmetric information
- Price impact
- Quote revisions
- Trade autocorrelation
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