The Other Side of the Trading Story: Evidence from NYSE

29 Pages Posted: 8 Sep 2008 Last revised: 12 Jul 2009

See all articles by Woon K. Wong

Woon K. Wong

IMRU, Cardiff Business School

Laurence Copeland

Cardiff University - Cardiff Business School

Ralph C. Lu

Ming Chuan University - Department of Finance

Date Written: May 13, 2009

Abstract

We analyze the TORQ dataset on the NYSE, breaking down transactions depending on whether the active or passive side was institutional or individual. We find that institutions are best informed, and earn highest returns when trading with individuals as counterparty. We also confirm the results of recent experimental studies that informed traders switch to limit orders towards the end of the day. Moreover, we discover that trading between institutions seems to carry little information, largely liquidity-driven and generates symmetrical order shocks, whereas the information asymmetry between institutions and individuals tends to give rise to negative correlation between buys and sells.

Keywords: liquidity trade, informed trades

JEL Classification: G14, G12

Suggested Citation

Wong, Woon K. and Copeland, Laurence S. and Lu, Ralph C., The Other Side of the Trading Story: Evidence from NYSE (May 13, 2009). Available at SSRN: https://ssrn.com/abstract=1263930 or http://dx.doi.org/10.2139/ssrn.1263930

Woon K. Wong (Contact Author)

IMRU, Cardiff Business School ( email )

Cardiff CF10 3EU
United Kingdom

Laurence S. Copeland

Cardiff University - Cardiff Business School ( email )

Aberconway Building
Colum Drive
Cardiff, CF10 3EU
United Kingdom
+44 29 20875740 (Phone)
+44 29 20874419 (Fax)

Ralph C. Lu

Ming Chuan University - Department of Finance ( email )

No. 250, Section 5
Zhongshan North Road
Taipei, 111
Taiwan

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