Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5058004 | Economics Letters | 2016 | 4 Pages |
â¢We propose a microstructure model considering trade durations, sizes, spreads, and depth.â¢Fast and large trades indicate informed trading in a highly liquid futures market.â¢Higher liquidity decreases (increases) the permanent (temporary) spread component.
By considering various market microstructure effects, this letter proposes a comprehensive trade indicator model incorporating trade duration, order sizes, bid-ask spreads, and market depth into a unified framework. Examining the intraday price behavior of the KOSPI200 futures market, we find that (i) fast trading indicates informed trading, (ii) stealth trading does not prevail, (iii) order-processing costs reach economies of scale, and (iv) liquidity significantly affects investors' order submission decisions in the highly liquid market.