Abstract

http://ssrn.com/abstract=1989555
 
 

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Discerning Information from Trade Data


David Easley


Cornell University - Department of Economics

Marcos Lopez de Prado


Guggenheim Partners, LLC; Lawrence Berkeley National Laboratory; Harvard University - RCC

Maureen O'Hara


Cornell University - Samuel Curtis Johnson Graduate School of Management

March 2015

Johnson School Research Paper Series No. 8-2012

Abstract:     
How best to discern trading intentions from market data? We examine the accuracy of three methods for classifying trade data: bulk volume classification (BVC), Tick Rule and Aggregated Tick Rule. We develop a Bayesian model of inferring information from trade executions, and show the conditions in which tick rules or bulk volume classification will predominate.

Empirically, we find that Tick rule approaches and BVC are relatively good classifiers of the aggressor side of trading, but bulk volume classifications are better linked to proxies of information-based trading. Thus, BVC would appear to be a useful tool for discerning trading intentions from market data.

Number of Pages in PDF File: 56

Keywords: Trade Classification, Bulk Volume Classification, flow toxicity, volume imbalance, market microstructure

JEL Classification: C02, D52, D53, G14


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Date posted: January 23, 2012 ; Last revised: March 19, 2015

Suggested Citation

Easley, David and Lopez de Prado, Marcos and O'Hara, Maureen, Discerning Information from Trade Data (March 2015). Johnson School Research Paper Series No. 8-2012. Available at SSRN: http://ssrn.com/abstract=1989555 or http://dx.doi.org/10.2139/ssrn.1989555

Contact Information

David Easley (Contact Author)
Cornell University - Department of Economics ( email )
414 Uris Hall
Ithaca, NY 14853-7601
United States
607-255-6283 (Phone)
607-255-2818 (Fax)
Marcos Lopez de Prado
Guggenheim Partners, LLC ( email )
330 Madison Avenue
New York, NY 10017
United States
HOME PAGE: http://www.QuantResearch.info
Lawrence Berkeley National Laboratory ( email )
One Cyclotron Road
Berkeley, CA 94720
United States
HOME PAGE: http://www.lbl.gov
Harvard University - RCC ( email )
26 Trowbridge Street
Cambridge, MA 02138
United States
HOME PAGE: http://www.rcc.harvard.edu
Maureen O'Hara
Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )
Ithaca, NY 14853
United States
607-255-3645 (Phone)
607-255-5993 (Fax)
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