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http://hdl.handle.net/10419/60521
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| Title: | | Market sidedness: Insights into motives for trade initiation  |
| 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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