Asymmetries in bid and ask responses to innovations in the trading process

Empirical Economics

Volumn 30, Issue 4, 2006, Pages 913-946

  Escribano, Alvaro ^a   Pascual, Roberto ^b  

^a UNIVERSIDAD CARLOS III DE MADRID   (Spain)

^b UNIVERSITAT DE LES ILLES BALEARS   (Spain)

Author keywords

Adverse selection costs; Asymmetric dynamics; Bid and ask time series; Market microstructure; VEC models

Indexed keywords

EMPIRICAL ANALYSIS; TRADE;

EID: 31044435181     PISSN: 03777332     EISSN: None     Source Type: Journal    
DOI: 10.1007/s00181-005-0006-9     Document Type: Article

References (64)

1. Arranz MA, Escribano A (2000) Cointegration testing under permanent breaks: A robust extended error correction model. Oxf Bull Econ Stat 62:23-52 10.1111/1468-0084.00158
2. Barclay MJ, Warner JB (1993) Stealth trading and volatility, which trades move prices? J Financ Econ 34:281-305 10.1016/0304-405X(93)90029-B
3. Bessembinder H, Kaufman HM (1997) A comparison of trade execution costs for NYSE and Nasdaq-listed stocks. J Financ Econ 46:293-319 10.1016/ S0304-405X(97)00032-9
4. Biais B, Hillion P, Spatt C (1995) An empirical analysis of the limit order book and the order flow in the Paris Bourse. J Finance 50:1655-1689
5. Blume ME, Goldstein MA (1997) Quotes, order flow, and price discovery. J Finance 52:221-244
6. Bollerslev T, Melvin M (1994) Bid-ask spreads and volatility in the foreign exchange market. An empirical analysis. J Int Econ 36:355-372 10.1016/0022-1996(94)90008-6
7. Chan LKC, Lakonishok J (1993) Institutional trades and intraday stock price behavior. J Financ Econ 33:173-199 10.1016/0304-405X(93)90003-T
8. Chan LKC, Lakonishok J (1995) The behavior of stock prices around institutional trades. J Finance 50(4):1147-1174
9. Chung KH, Van Ness BF, Van Ness RA (1999) Limit orders and the bid-ask spread. J Financ Econ 53:255-287 10.1016/S0304-405X(99)00022-7
10. Davidson R, MacKinnon JG (1993) Estimation and Inference in Econometrics. Oxford University Press
11. Dufour A, Engle RF (2000) Time and the price impact of a trade. J Finance 55(6):2467-2498 10.1111/0022-1082.00297
12. Easley D, O'Hara M (1987) Price, trade size, and information in securities markets. J Financ Econ 19:69-90 10.1016/0304-405X(87)90029-8
13. Easley D, O'Hara M (1992) Time and the process of security price adjustment. J Finance 47(2):577-605
14. Easley D, Kiefer NM, O'Hara M (1997) One day in the life of a very common stock. Rev Financ Stud 10:805-835 10.1093/rfs/10.3.805
15. Ellis K, Michaely R, O'Hara M (2000) The accuracy of trade classification rules: Evidence from Nasdaq. J Financ Quant Anal 35:529-551
16. Engle R, Granger C (1987) Co-integration and error correction: representation, estimation and testing. Econometrica 35:251-276
17. Engle RF, Patton AJ (2004) Impacts of trades in a error-correction model of quote prices. J Financ Mark 7:1-25 10.1016/S1386-4181(03)00018-1
18. Engle RF, Yoo BS (1991) Cointegrated economic time series: A survey with new results. In: Granger CWJ, Engle RF (eds) Long-run economic relations. Readings in cointegration, Oxford University Press, pp 237-266
19. Escribano A, Granger CWJ (1998) Investigating the relationships between gold and silver prices. J Forecast (17):81-107 10.1002/ (SICI)1099-131X(199803)17:2<81::AID-FOR680>3.0.CO;2-B
20. Escribano A, Peña D. (1994) Cointegration and common factors. J Time Ser Anal 15:577-586
21. Glosten LR (1987) Components of the bid-ask spread and the statistical properties of transaction prices. J Finance 42:1293-1307
22. Glosten LR, Harris LE (1988) Estimating the components of the bid/ask spread. J Financ Econ 21:123-142 10.1016/0304-405X(88)90034-7
23. Glosten LR, Milgrom PR (1985) Bid, ask and transaction prices in specialist market with heterogeneously informed traders. J Financ Econ 14:71-100 10.1016/0304-405X(85)90044-3
24. Goldstein MA, Kavajecz KA (2004) Trading strategies during circuit breakers and extreme market movements. J Financ Mark 7:301-333 10.1016/ j.finmar.2003.11.003
25. WH Green (1997) Econometric analysis Prentice-Hall Upper Saddle River, NJ
26. Griffiths MD, Smith BF, Alasdair D, Turnbull S, White RW (2000) The costs and determinants of order aggressiveness. J Financ Econ 56:65-88 10.1016/S0304-405X(99)00059-8
27. Harris M, Raviv A (1993) Differences of opinion make a horse race. Rev Financ Stud 6:473-506 10.1093/rfs/6.3.473
28. Harris FH, McInish TH, Shoesmith GL, Wood RA (1995) Co-integration, error correction, and price discovery on internationally linked security markets. J Financ Quant Anal 30:563-579
29. Hasbrouck J (1988) Trades, quotes and information. J Financ Econ 22:229-252 10.1016/0304-405X(88)90070-0
30. Hasbrouck J (1991) Measuring the information content of stock trades. J Finance 46:179-207
31. Hasbrouck J (1995) One security, many markets: Determining the contributions to price discovery. J Finance 50(4):1175-1199
32. J Hasbrouck (1996) Modeling market microstructure time series. In: Maddala GS, Rao CR (eds) Handbook of statistics, vol 14. Statistical methods in finance. Elsevier, North-Holland, Amsterdam
33. Hasbrouck J (1999a) Security bid/ask dynamics with discreteness and clustering: Simple strategies for modeling and estimation. J Financ Mark 2:1-28 10.1016/S1386-4181(98)00008-1
34. Hasbrouck J (1999b) The dynamics of discrete bid and ask quotes. J Finance 54(6):2109-2142 10.1111/0022-1082.00183
35. Hasbrouck J, Sofianos G, Sosebee D (1993) New York Stock Exchange systems and trading procedures, NYSE Working Paper #93-01
36. Hausman JA, Lo AW, MacKinlay AC (1992) An ordered probit analysis of transaction costs prices. J Financ Econ 31:319-379 10.1016/ 0304-405X(92)90038-Y
37. Holthausen RW, Leftwich RW, Mayers D (1987) The effect of large block transactions on security prices. J Financ Econ 19:237-267 10.1016/ 0304-405X(87)90004-3
38. Huang RD, Stoll HR (1994) Market microstructure and stock return predictions. Rev Financ Stud 7(1):179-213 10.1093/rfs/7.1.179
39. Huang RD, Stoll HR (1996) Dealer versus auction markets: A paired comparison of execution costs on NASDAQ and the NYSE. J Financ Econ 41:313-357 10.1016/0304-405X(95)00867-E
40. Huang RD, Stoll HR (1997) The components of the bid-ask spread: A general approach. Rev Financ Stud 10:995-1034 10.1093/rfs/10.4.995
41. Jang H, Venkatesh PC (1991) Consistency between predicted and actual bid-ask quote-revisions. J Finance 46:433-446
42. Johansen S (1991) Estimation and hypothesis testing of co-integration vectors in Gaussian vector autoregressive models. Econometrica 59:1551-1580
43. Kavajecz KA (1999) A specialist's quoted depth and the limit order book. J Finance 54:747-771 10.1111/0022-1082.00124
44. Keim DB, Madhavan A (1995) Anatomy of the trading process: Empirical evidence on the behavior of institutional traders. J Financ Econ 37:371-398 10.1016/0304-405X(94)00799-7
45. Kempf A, Korn O (1999) Market depth and order size. J Financ Mark 2:29-48 10.1016/S1386-4181(98)00007-X
46. Koski JL, Michaely R (2000) Prices, liquidity, and the information content of trades. Rev Financ Stud 13:659-696 10.1093/rfs/13.3.659
47. Lakonishok J, Lee I (2001) Are insider trades informative? Rev Financ Stud 14(1):79-111 10.1093/rfs/14.1.79
48. Lee CM, Ready MJ (1991) Inferring trade direction from intraday data. J Finance 46:733-746
49. Lin JC, Sanger GC, Booth GG (1995) Trade size and components of the bid-ask spread. Rev Financ Stud 8:1153-1183 10.1093/rfs/8.4.1153
50. Madhavan A, Sofianos G (1998) An empirical analysis of NYSE specialist trading. J Financ Econ 48:189-210 10.1016/S0304-405X(98)00008-7
51. Madhavan A, Richardson M, Roomans M (1997) Why do security prices change? A transaction-level analysis of NYSE stocks. Rev Financ Stud 10:1035-1064 10.1093/rfs/10.4.1035
52. Odders-White ER (2000) On the occurrence and consequences of inaccurate trade classification. J Financ Mark 3:259-286 10.1016/ S1386-4181(00)00006-9
53. M O'Hara (1995) Market microstructure theory. Blackwell, Cambridge
54. Park JY, Phillips PCB (2000) Nonstationary binary choice. Econometrica 68:1249-1280 10.1111/1468-0262.00157
55. Pascual R, Pascual-Fuster B, Climent F (2005) Cross-listing, price discovery, and the informativeness of the trading process. J Financ Mark, forthcoming
56. Roll R (1984) A simple implicit measure of the effective bid-ask spread in a efficient market. J Finance 39:1127-1139
57. Stock J, Watson M (1988) Testing for common trends. J Am Stat Assoc 83:1097-1107
58. Stoll HR (1989) Inferring the components of the bid-ask spread: Theory and empirical tests. J Finance 19:115-134
59. Subrahmanyam A (1997) Multi-market trading and the informativeness of stock trades: An empirical intraday analysis. J Econ Bus 49:515-531 10.1016/S0148-6195(97)00037-4
60. Tse Y (2000) Further examination of price discovery on the NYSE and regional exchanges. J Financ Res 23:331-351
61. H White (1994) Estimation, inference and specification analysis. Cambridge University Press, Cambridge
62. JM Wooldridge (1994) Estimation and inference for dependent processes. In: Engle RF, McFadden DL (eds) Handbook of econometrics, vol IV. Elsevier North Holland, Amsterdam
63. Zellner A (1962) An efficient method of estimating seemingly unrelated regressions and tests for aggregation bias. J Am Stat Assoc 57:348-368
64. Zhang MY, Russell JR, Tsay RS (2005) Determinants of bid and ask quotes and implications for the cost of trading, Working Paper, University of Chicago