Ozsoylev, Han and Takayama, Shino (2010) Price, trade size, and information revelation in multi-period securities markets. Journal of Financial Markets, 13 (1). pp. 49-76.
We study price formation in securities markets, using the sequential trade framework of Glosten and Milgrom (1985). This paper makes one basic methodological advance over previous research on sequential securities trading: we allow traders to choose from n trade sizes in a multi-period market, where n can be arbitrarily large. We examine how trade size multiplicity affects the intertemporal dynamics of trading strategies, bid-ask spreads, and information revelation. We show that price impact, as a function of trade size, is increasing and exhibits (discrete) concavity.
|Keywords:||affected organization, ask spreads, asymmetric, asymmetric information, bid, bid–ask spreads, glosten, glosten–milgrom, how processinformation, main objective, market, market microstructure, market microstructure studies, milgrom, paper, price formation, price formation process, sequential trade, trade size|
|Centre:||Faculty of Finance|
|Date Deposited:||17 Nov 2011 17:56|
|Last Modified:||23 Oct 2015 14:06|
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