The probability of informed trading measured with price impact, price reversal, and volatility

Yoshihiro Kitamura

doi:10.1016/j.intfin.2016.02.001

The probability of informed trading measured with price impact, price reversal, and volatility

Yoshihiro Kitamura

School of Social Sciences

Research output: Contribution to journal › Article

1 Citation (Scopus)

Abstract

Contemporaneous and positive correlation between order flow and exchange rate is a stylized fact. I postulate that the order flow driven by informed trading has a significant price impact. I also do that little price reversal occurs in the subsequent period. The Markov-switching model provides probabilities of a significant price impact and little price reversal. I apply these probabilities to measure the probability of informed trading. The measure explains a greater share of the random walk component of price compared to other measures offered by previous studies.

Original language	English
Journal	Journal of International Financial Markets, Institutions and Money
DOIs	https://doi.org/10.1016/j.intfin.2016.02.001
Publication status	Accepted/In press - 2015 Jan 19

Fingerprint

Keywords

Exchange rates
High-frequency data
Informed trading
Markov-switching model

ASJC Scopus subject areas

Economics and Econometrics
Finance

Cite this

Kitamura, Y. (Accepted/In press). The probability of informed trading measured with price impact, price reversal, and volatility. Journal of International Financial Markets, Institutions and Money. https://doi.org/10.1016/j.intfin.2016.02.001

@article{ea4978b72ff04573a04cedf8fc996fec,

title = "The probability of informed trading measured with price impact, price reversal, and volatility",

abstract = "Contemporaneous and positive correlation between order flow and exchange rate is a stylized fact. I postulate that the order flow driven by informed trading has a significant price impact. I also do that little price reversal occurs in the subsequent period. The Markov-switching model provides probabilities of a significant price impact and little price reversal. I apply these probabilities to measure the probability of informed trading. The measure explains a greater share of the random walk component of price compared to other measures offered by previous studies.",

keywords = "Exchange rates, High-frequency data, Informed trading, Markov-switching model",

author = "Yoshihiro Kitamura",

year = "2015",

month = jan,

day = "19",

doi = "10.1016/j.intfin.2016.02.001",

language = "English",

journal = "Journal of International Financial Markets, Institutions and Money",

issn = "1042-4431",

publisher = "Elsevier BV",

}

TY - JOUR

T1 - The probability of informed trading measured with price impact, price reversal, and volatility

AU - Kitamura, Yoshihiro

PY - 2015/1/19

Y1 - 2015/1/19

N2 - Contemporaneous and positive correlation between order flow and exchange rate is a stylized fact. I postulate that the order flow driven by informed trading has a significant price impact. I also do that little price reversal occurs in the subsequent period. The Markov-switching model provides probabilities of a significant price impact and little price reversal. I apply these probabilities to measure the probability of informed trading. The measure explains a greater share of the random walk component of price compared to other measures offered by previous studies.

AB - Contemporaneous and positive correlation between order flow and exchange rate is a stylized fact. I postulate that the order flow driven by informed trading has a significant price impact. I also do that little price reversal occurs in the subsequent period. The Markov-switching model provides probabilities of a significant price impact and little price reversal. I apply these probabilities to measure the probability of informed trading. The measure explains a greater share of the random walk component of price compared to other measures offered by previous studies.

KW - Exchange rates

KW - High-frequency data

KW - Informed trading

KW - Markov-switching model

UR - http://www.scopus.com/inward/record.url?scp=84959419948&partnerID=8YFLogxK

UR - http://www.scopus.com/inward/citedby.url?scp=84959419948&partnerID=8YFLogxK

U2 - 10.1016/j.intfin.2016.02.001

DO - 10.1016/j.intfin.2016.02.001

M3 - Article

AN - SCOPUS:84959419948

JO - Journal of International Financial Markets, Institutions and Money

JF - Journal of International Financial Markets, Institutions and Money

SN - 1042-4431

ER -

Access to Document

10.1016/j.intfin.2016.02.001