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Measuring the Information Content of Stock Trades

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  • Hasbrouck, Joel

Abstract

This paper suggests that the interactions of security trades and quote revisions be modeled as a vector autoregressive system. Within this framework, a trade's information effect may be meaningfully measured as the ultimate price impact of the trade innovation. Estimates for a sample of NYSE issues suggest a trade's full price impact arrives only with a protracted lag; the impact is a positive and concave function of the trade size; large trades cause the spread to widen; trades occurring in the face of wide spreads have larger price impacts; and information asymmetries are more significant for smaller firms. Copyright 1991 by American Finance Association.

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  • Hasbrouck, Joel, 1991. "Measuring the Information Content of Stock Trades," Journal of Finance, American Finance Association, vol. 46(1), pages 179-207, March.
    • Handle: RePEc:bla:jfinan:v:46:y:1991:i:1:p:179-207
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