Publication Type

Conference Paper

Publication Date

12-2015

Abstract

According to the Kyle (1985) model of informed trading, information in trade size is likely to effect a permanent price impact, as opposed to bid-ask bounce, which mainly captures transitory price fluctuation. However, two prominent structural models in the literature do not include trade size in their framework. In this paper, we present a nesting relationship of major structural models and formulate a generalized model that includes all relevant trade variables. A new measure to quantify the amount of information in the order flow is proposed. Using this price impact measure, our empirical analysis shows that it is indeed the “surprise” in trade size that contributes significantly in reflecting the price change of Nikkei and TOPIX futures.

Discipline

Finance and Financial Management

Research Areas

Quantitative Finance

Publication

Conference on the Theories and Practices of Securities and Financial Markets 23rd SFM 2015, December 11-12

First Page

1

Last Page

40

City or Country

Kaohsiung

Copyright Owner and License

Authors

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

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