Time and the Price Impact of a Trade

  • Author(s): Alfonso Dufour, Robert F. Engle
  • Published: Dec 17, 2002
  • Pages: 2467-2498
  • DOI: 10.1111/0022-1082.00297

We use Hasbrouck's (1991) vector autoregressive model for prices and trades to empirically test and assess the role played by the waiting time between consecutive transactions in the process of price formation. We find that as the time duration between transactions decreases, the price impact of trades, the speed of price adjustment to trade‐related information, and the positive autocorrelation of signed trades all increase. This suggests that times when markets are most active are times when there is an increased presence of informed traders; we interpret such markets as having reduced liquidity.

Jump to menu

Main Navigation

Search the Site / Journal

Search Keywords

Search Tips

Members' Login

Credentials

Members' Options

Site Footer

View Mobile Version