Bulk Volume Classification and Information Detection

44 Pages Posted: 11 Oct 2014 Last revised: 26 Jul 2018

See all articles by Marios A. Panayides

Marios A. Panayides

University of Cyprus - Department of Accounting and Finance; University of Pittsburgh - Katz Graduate School of Business

Thomas Shohfi

Rensselaer Polytechnic Institute (RPI) - Department of Finance and Accounting

Jared D. Smith

North Carolina State University - Poole College of Management

Date Written: July 16, 2018

Abstract

Using European stock data from two different venues and time periods, for which we can identify each trade’s aggressor, we test the performance of the bulk volume classification (Easley et al. (2016); BVC) algorithm. BVC is data efficient, but may identify trade aggressors less accurately than “bulk” traditional trade-level algorithms. We find, however, that using out-of-sample calibrated BVC mitigates accuracy disadvantages. In addition, BVC-estimated trade flow is related to proxies of informed trading, while bulk tick test is not. Interestingly, we also document that the identification of individual trade aggressors no longer captures information. In the new era of fast trading, sophisticated investors, and smart order execution, BVC appears to be the most versatile algorithm.

Keywords: Classification algorithms; bulk volume; informed trading strategies

JEL Classification: G11, G12, G14, G18

Suggested Citation

Panayides, Marios A. and Shohfi, Thomas and Smith, Jared D., Bulk Volume Classification and Information Detection (July 16, 2018). Available at SSRN: https://ssrn.com/abstract=2503628 or http://dx.doi.org/10.2139/ssrn.2503628

Marios A. Panayides

University of Cyprus - Department of Accounting and Finance ( email )

University of Cyprus
P.O. Box 20537
Nicosia, CY-1678
Cyprus

University of Pittsburgh - Katz Graduate School of Business ( email )

372 Mervis Hall
Pittsburgh, PA 15260
United States

Thomas Shohfi (Contact Author)

Rensselaer Polytechnic Institute (RPI) - Department of Finance and Accounting ( email )

Pittsburgh Building
110 8th street
Troy, NY 12180
United States

HOME PAGE: http://shohfi.com/

Jared D. Smith

North Carolina State University - Poole College of Management ( email )

Nelson Hall
Raleigh, NC 27695-8614
United States

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