Liquidity Needs, Private Information, Feedback Trading: Verifying Motives to Trade

National Bank of Poland Working Paper No. 119

26 Pages Posted: 10 Jul 2012

See all articles by Bartosz Gebka

Bartosz Gebka

University of Newcastle Business School

Dobromil Serwa

National Bank of Poland; Warsaw School of Economics (SGH)

Date Written: June 1, 2012

Abstract

We analyze investors' motives for trading on international stock markets and investigate whether evidence for these motives is robust when time-varying market volatility, changes between calm and turbulent periods, and existence of international financial spillovers are controlled for. Applying the Markov-switching GARCH specification of the standard model commonly used in the literature, we find that trades conducted due to liquidity needs or driven by private information cannot be identified unequivocally in any market, and positive feedback trading becomes predominant when return spillovers from the US market are taken into account.

Keywords: informed trading, liquidity trading, feedback trading, return autocorrelation, trading volume, financial spillovers, contagion

JEL Classification: C32, G12, G15

Suggested Citation

Gebka, Bartosz and Serwa, Dobromil, Liquidity Needs, Private Information, Feedback Trading: Verifying Motives to Trade (June 1, 2012). National Bank of Poland Working Paper No. 119, Available at SSRN: https://ssrn.com/abstract=2102572 or http://dx.doi.org/10.2139/ssrn.2102572

Bartosz Gebka (Contact Author)

University of Newcastle Business School ( email )

Newcastle upon Tyne, NE1 4SE
United Kingdom
+44 191 208 1578 (Phone)

HOME PAGE: http://https://www.ncl.ac.uk/business-school/staff/profile/bartoszgebka.html#publications

Dobromil Serwa

National Bank of Poland ( email )

00-919 Warsaw
Poland

Warsaw School of Economics (SGH) ( email )

aleja Niepodleglosci 162
PL-Warsaw, 02-554
Poland

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