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Title:Market sidedness: Insights into motives for trade initiation PDF Logo
Authors:Sarkar, Asani
Schwartz, Robert A.
Issue Date:2007
Series/Report no.:Staff Report, Federal Reserve Bank of New York 292
Abstract:In this paper, we infer motives for trade initiation from market sidedness. We define trading as more two-sided (one-sided) if the correlation between the numbers of buyerand seller-initiated trades increases (decreases), and assess changes in sidedness (relative to a control sample) around events that identify trade initiators. Consistent with asymmetric information, trading is more one-sided prior to merger news. Consistent with belief heterogeneity, trading is more two-sided (1) before earnings and macro announcements with greater dispersions of analyst forecasts and (2) after earnings and macro news events with larger announcement surprises. A simultaneous equation system is used to examine the co-determinacy of sidedness, the bid-ask spread, volatility, the number of trades, and the order imbalance.
Subjects:sidedness, divergent beliefs, trade initiation, trading motives, earnings news, macro news
JEL:G10
G14
G34
Document Type:Working Paper
Appears in Collections:Staff Reports, Federal Reserve Bank of New York

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