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Two-sided markets and intertemporal trade clustering: insights into trading motives
We show that equity markets are typically two-sided and that trades cluster in certain trading intervals for both NYSE and Nasdaq stocks under a broad range of conditions-news and non-news days, different times of the day, and a spectrum of trade sizes. By "two-sided" we mean that the arrivals of buyer-initiated and seller-initiated trades are positively correlated; by "trade clustering" we mean that trades tend to bunch together in time with greater frequency than would be expected if their arrival were a random process. Controlling for order imbalance, number of trades, news, and ...
Report
Market sidedness: insights into motives for trade initiation
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 buyer- and 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 ...