Inter-Temporal Trade Clustering and Two-Sided Markets
نویسندگان
چکیده
Inter-Temporal Trade Clustering and Two-Sided Markets We show that equity markets are two-sided and that trades cluster in certain half-hour periods 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 in half-hour intervals are positively correlated; by “trade clustering” we mean that trades tend to bunch together in certain half-hour intervals with greater frequency than would be expected if their arrival was a random process. Controlling for trading volume, news, and other microstructure effects, we find that two-sided clustering leads to higher volatility but lower trading costs. Our analysis has implications for trader behavior, market structure, and the process by which new information is incorporated into market prices.
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