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Inter-Temporal Trade Clustering and Two-Sided Markets: Insights into Trading Motives

57 Pages Posted: 16 Mar 2005 Last revised: 7 Oct 2015

Asani Sarkar

Federal Reserve Bank of New York

Robert A. Schwartz

Baruch College - CUNY

Date Written: January 1, 2006


We show that equity trades are typically two-sided and cluster together in certain time intervals for both NYSE and Nasdaq stocks under a broad range of conditions - news and non-news days, different times of the day and trade sizes. By two-sided we mean that the arrivals of buyer-initiated and seller-initiated trades are correlated; by clustering we mean that trades tend to bunch together in certain intervals with greater frequency than would be expected if their arrivals were random. Controlling for order imbalance, number of trades, news, and other microstructure effects, we find that two-sided clustering is associated with higher volatility but lower trading costs. Our analysis has implications for trader behavior, market structure, and the process by which new information is incorporated into market prices.

Keywords: Two-sided markets, trade clustering, trading costs, volatility, stocks

JEL Classification: G10, G14

Suggested Citation

Sarkar, Asani and Schwartz, Robert A., Inter-Temporal Trade Clustering and Two-Sided Markets: Insights into Trading Motives (January 1, 2006). AFA 2006 Boston Meetings Paper. Available at SSRN: or

Asani Sarkar (Contact Author)

Federal Reserve Bank of New York ( email )

Research Department
33 Liberty Street
New York, NY 10045
United States
212-720-8943 (Phone)
212-720-1582 (Fax)


Robert Schwartz

Baruch College - CUNY ( email )

Zicklin School of Business
17 Lexington Avenue
New York, NY 10010
United States
646-312-3467 (Phone)
646-312-3530 (Fax)

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