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Trade-size clustering and price efficiency
Chen, Tao
2019
Source PublicationJAPAN AND THE WORLD ECONOMY
ISSN0922-1425
Volume49Pages:195-203
Abstract

Using a sample of 26 markets, this paper investigates if trade-size clustering affects price efficiency. Our results suggest that more clustering trades are associated with greater resemblance of a random walk, less pricing errors, and shorter price delays. Moreover, we examine three underlying mechanisms to explain how clustering improves efficiency. First, we show that clustering trades are informative, consistent with the idea that stealth traders leverage such tactics to convey private information to prices. Second, we discover that clustering trades are positively related to investor attention (stock liquidity), implying that informed clustering trades happen at the presence of enormous uninformed investors. High attention and liquid markets help reduce the trading friction, thereby prompting quick price adjustments to private information released by the stealth trading.

KeywordSize Clustering Stealth Trading Price Efficiency
DOIhttps://doi.org/10.1016/j.japwor.2018.12.002
Indexed BySSCI ; SSCI
Language英语
WOS Research AreaBusiness & Economics
WOS SubjectEconomics
WOS IDWOS:000461409600018
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Cited Times [WOS]:0   [WOS Record]     [Related Records in WOS]
Document TypeJournal article
CollectionFaculty of Business Administration
DEPARTMENT OF FINANCE AND BUSINESS ECONOMICS
Corresponding AuthorChen, Tao
AffiliationFaculty of Business Administration, University of Macau, Macau, China
First Author AffilicationFaculty of Business Administration
Corresponding Author AffilicationFaculty of Business Administration
Recommended Citation
GB/T 7714
Chen, Tao. Trade-size clustering and price efficiency[J]. JAPAN AND THE WORLD ECONOMY,2019,49:195-203.
APA Chen, Tao.(2019).Trade-size clustering and price efficiency.JAPAN AND THE WORLD ECONOMY,49,195-203.
MLA Chen, Tao."Trade-size clustering and price efficiency".JAPAN AND THE WORLD ECONOMY 49(2019):195-203.
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