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| Author: | Bernhardt, D. Hughson, E. |
| Title: | Intraday trade in dealership markets |
| Journal: | European Economic Review
2002 : OCT, VOL. 46:9, p. 1697-1732 |
| Index terms: | MARKETS STRUCTURAL ANALYSIS TRADE MODELS |
| Language: | eng |
| Abstract: | The authors develop and test a structural asymmetric information transaction model to characterize the price impact of information when markets are thin. Since orders are accepted individually, the model allows for transaction costs and brokerage fees. Equilibrium demands mixed entry strategies on the part of potentially informed traders. Estimation of the structural parameters is performed using a maximum likelihood procedure on NYSE data. The structural model is rejected primarily because the nonlinear restrictions do not allow for sufficient correlation between price movements and pricing errors. This leads to unreasonably low estimates of the probability of informed trade relative to an unrestricted alternative. |
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