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Intraday Trade in Dealership Markets

Bernhardt, Dan and Hughson, Eric (1993) Intraday Trade in Dealership Markets. Social Science Working Paper, 852. California Institute of Technology , Pasadena, CA. (Unpublished) https://resolver.caltech.edu/CaltechAUTHORS:20170824-151719863

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Abstract

We develop and test a structural asymmetric information transaction model to characterize the price impact of information when markets are thin. Since orders are accepted individually, the model allows for transaction costs and brokerage fees. Equilibrium demands mixed entry strategies on the part of potentially-informed traders. Estimation of the structural parameters is performed using a maximum likelihood procedure on NYSE data. The price impact of information is found to be positive and significant, but economically small. This is because while the amount of private information is substantial, the quality of the information signals is quite poor. Insiders do not trade small quantities, which suggests that their ability to divide orders is limited by transaction costs.


Item Type:Report or Paper (Working Paper)
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http://resolver.caltech.edu/CaltechAUTHORS:20170829-090518602Related ItemPublished Version
Additional Information:We wish to thank Richard Green, David Marshall, Robert Miller, Ken Singleton, Chester Spatt, John Piazza, a former specialist on the American Stock Exchange, for valuable guidance and discussions in the formulation of this problem. Published as Bernhardt, Dan, and Eric Hughson. "Intraday trade in dealership markets." European Economic Review 46, no. 9 (2002): 1697-1732.
Group:Social Science Working Papers
Subject Keywords:Market microstructure, Structural estimation
Series Name:Social Science Working Paper
Issue or Number:852
Classification Code:JEL: C5, G0
Record Number:CaltechAUTHORS:20170824-151719863
Persistent URL:https://resolver.caltech.edu/CaltechAUTHORS:20170824-151719863
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:80775
Collection:CaltechAUTHORS
Deposited By: Jacquelyn Bussone
Deposited On:28 Aug 2017 23:51
Last Modified:03 Oct 2019 18:34

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