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Estimating the Proportion of Informed Trade in Call Auctions

Van Bommel, Jos; Sogorb, Francisco; Raposo, Juan; Riva, Fabrice (2011), Estimating the Proportion of Informed Trade in Call Auctions. https://basepub.dauphine.fr/handle/123456789/9681

Type
Document de travail / Working paper
External document link
http://halshs.archives-ouvertes.fr/halshs-00696342
Date
2011
Publisher
Université Paris-Dauphine
Published in
Paris
Pages
28 p.
Metadata
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Author(s)
Van Bommel, Jos
Sogorb, Francisco
Raposo, Juan
Riva, Fabrice
Abstract (EN)
We show that the distribution of trading volume in call auctions is indicative of the proportion of informed trade. We use the Kyle (1985) model to predict the shape of the volume distribution as a function of the proportion of informed trade. If most liquidity demanders are uninformed, there is likely to be significant wash trade among them, resulting in Normal-like volume distributions. If most liquidity demanders are informed, their trades are correlated so that the volume distribution is skewed and has a higher coefficient of variation.
Subjects / Keywords
Market microstructure; Liquidity; Call auctions
JEL
G12 - Asset Pricing; Trading Volume; Bond Interest Rates
C13 - Estimation: General
C22 - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes