Measuring the Information Content of Stock Trades
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- Author(s): JOEL HASBROUCK
- Published: Apr 30, 2012
- Pages: 179-207
- DOI: 10.1111/j.1540-6261.1991.tb03749.x
This paper suggests that the interactions of security trades and quote revisions be modeled as a vector autoregressive system. Within this framework, a trade's information effect may be meaningfully measured as the ultimate price impact of the trade innovation. Estimates for a sample of NYSE issues suggest: a trade's full price impact arrives only with a protracted lag; the impact is a positive and concave function of the trade size; large trades cause the spread to widen; trades occurring in the face of wide spreads have larger price impacts; and, information asymmetries are more significant for smaller firms.