The paper analyses a simplified version of a Glosten-Milgrom style specialist security trading model with trade-timing. In a setting where traders are differentially informed, if the best-informed investors have a sufficiently strong or weak impact on prices then the investors with the strongest impact on prices delay their investment strategically, pretending to be the low-impact types. JEL Cl...

We propose an Autoregressive Conditional Marked Duration (ACMD) model for the analysis of irregularly spaced transaction data. Based on the Autoregressive Conditional Duration (ACD) model, the ACMD model assigns marks to characterize events such as tick movements and trade directions (buy/sell). Applying the ACMD model to tick movements, we study the influence of trade frequency, direction and ...

" Cluster PIN: A new estimation method for the probability of informed trading " Abstract We present a new method for estimating the probability of informed trading (PIN). This method, called Cluster PIN (CPIN), is based on cluster analysis used in machine learning. CPIN does not require maximum likelihood estimation and thus avoids the computational issues that have been associated with some p...

This paper shows empirically that the positive association between mutual fund ownership and firm value in China is mainly driven by the informed trading of mutual funds. Utilizing the unique short term feature of mutual fund holdings for the period from 2001 to 2010, we provide an informational link between a decomposed component of market-to-book ratio (firm specific valuation component) and ...

Empirical evidence shows word-of-mouth communication has real effects on trading patterns in financial markets. On top of that, the social network through which the information conveys also plays a crucial role. We propose a framework that allows informed traders to directly and truthfully communicate information in four major social interaction structures represented by circle, tree, star and ...

From the market microstructure perspective, technical analysis can be profitable when informed traders make systematic mistakes or when uninformed traders have predictable impacts on price. However, chartists face a considerable degree of trading uncertainty because technical indicators such as moving averages are essentially imperfect filters with a nonzero phase shift. Consequently, technical...

A key intuition of standard rational expectations models is that private information about future payoffs can by itself not generate trading. Trading is only possible if there is an additional motive for trading such as for example liquidity trading. In this paper I show how this misleading intuition results from an assumption that all of these models have in common: investors have negative exp...

We examine the role of information-based stock trading in affecting the risk-incentive relation. By incorporating an endogenous informed trading into an optimal incentive contracting model, we analytically show that, apart from reducing incentives, a greater risk increases the level of information-based trading which consequently enhances executive incentives and offsets the negative risk-incen...

This study examines the relationships between the herding of various investor groups and trading noise in the Taiwan stock market to determine whether any of the investor groups tend to herd rationally. The study uses a unique and comprehensive data set on intraday transactions and limit order books of the Taiwan Stock Exchange (TWSE). We calculate the high-frequency herding measures and tradin...