Intraday Stealth Trading: Which Trades Move Prices During Periods of High Volume?

31 Pages Posted: 30 Jul 2008

See all articles by Benjamin M. Blau

Benjamin M. Blau

Utah State University - Huntsman School of Business

Bonnie F. Van Ness

University of Mississippi - Department of Finance

Robert A. Van Ness

University of Mississippi - Department of Finance

Date Written: July, 29 2008

Abstract

Research documents a U-shaped intraday pattern of returns (Wood et al., 1985, and Harris, 1986). This paper examines which trade sizes drive the U-shaped pattern. We find that intraday price changes from larger trades exhibit a U-shaped pattern while prices changes from smaller trades show a reverse U-shaped pattern. We argue that price changes from smaller trades are higher during the middle of the day because informed investors break up their trades in order to disguise their information (Barclay and Warner, 1993) when intraday volume is low. Price changes from larger trades are likely higher at the beginning and end of the day because high volume allows informed investors to increase their trade size without revealing their information to the market (Admati and Pfleiderer, 1988). Consistent with our argument, we find that the relation between volume and price changes is increasing across trade sizes.

Keywords: Stealth Trading, intraday, volume, trade size

Suggested Citation

Blau, Benjamin M. and Van Ness, Bonnie F. and Van Ness, Robert A., Intraday Stealth Trading: Which Trades Move Prices During Periods of High Volume? (July, 29 2008). Available at SSRN: https://ssrn.com/abstract=1186782 or http://dx.doi.org/10.2139/ssrn.1186782

Benjamin M. Blau

Utah State University - Huntsman School of Business ( email )

3500 Old Main Hill
Logan, UT 84322
United States

Bonnie F. Van Ness

University of Mississippi - Department of Finance ( email )

Oxford, MS 38677
United States
662-915-6749 (Phone)
662-915-7968 (Fax)

Robert A. Van Ness (Contact Author)

University of Mississippi - Department of Finance ( email )

Oxford, MS 38677
United States

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