Pre-Trade Transparency on the Italian Stock Exchange: A Trade Size Model on Panel Data

32 Pages Posted: 25 Sep 2009

See all articles by Maria Elena Bontempi

Maria Elena Bontempi

University of Bologna - Department of Economics

Caterina Lucarelli

Università Politecnica delle Marche

Camilla Mazzoli

Polytechnic University of Marche

Annagrazia Quaranta

University of Camerino - Department of Mathematics and Computer Sciences

Date Written: September 24, 2009

Abstract

The purpose of this study was to analyze the effects that have been caused by changes in pre-trade transparency upon the behavior of stock traders. We used a trade size model and tested it before, during and after the period when the Italian Stock Exchange introduced a 20-level order book with disaggregated orders. Tick by tick data of the whole set of stocks (up to 277) listed on the Italian Stock Exchange were studied through fixed-effects panel models, within intra day (every 30 minutes and 150 minutes) and daily time frames. Our results indicate that order flows, bidask spreads, levels of risk and some information events differentially affect trade sizes when investors receive better information prior to negotiation. Both (intra day) informed and uninformed traders operating in a more transparent market became more reticent, with reduced trades sizes and higher orders’ cancellations. Moreover, it appears that the higher degree of order book disclosure permits traders to downsize their level of risk aversion; i.e. it reduces the ’uncertainty’ that would otherwise result in disrupted trading activity under conditions of information opacity.

Keywords: pre-trade transparency, trade size, private information, panel data

JEL Classification: G14, D03, D82, C23, C82

Suggested Citation

Bontempi, Maria Elena and Lucarelli, Caterina and Mazzoli, Camilla and Quaranta, Annagrazia, Pre-Trade Transparency on the Italian Stock Exchange: A Trade Size Model on Panel Data (September 24, 2009). Available at SSRN: https://ssrn.com/abstract=1477838 or http://dx.doi.org/10.2139/ssrn.1477838

Maria Elena Bontempi (Contact Author)

University of Bologna - Department of Economics ( email )

Strada Maggiore, 45
40125 Bologna, 40125
Italy
+39 051 2092600 (Phone)
+39 051 2092664 (Fax)

Caterina Lucarelli

Università Politecnica delle Marche ( email )

Piazzale Martelli 8
Ancona, 18039
Italy
0039.071.2207196 (Phone)
0039.071.2207253 (Fax)

Camilla Mazzoli

Polytechnic University of Marche ( email )

Piazzale Martelli 8
Ancona, 18039
Italy

Annagrazia Quaranta

University of Camerino - Department of Mathematics and Computer Sciences ( email )

Via M. Delle Carceri
Camerino, 62032
Italy
+390737402503 (Phone)

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
103
Abstract Views
819
rank
286,058
PlumX Metrics