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Measuring the Information Content of Stock Trades

1991; Wiley; Volume: 46; Issue: 1 Linguagem: Inglês

10.1111/j.1540-6261.1991.tb03749.x

1540-6261

Joel Hasbrouck,

Corporate Finance and Governance

ABSTRACT This paper suggests that the interactions of security trades and quote revisions be modeled as a vector autoregressive system. Within this framework, a trade's information effect may be meaningfully measured as the ultimate price impact of the trade innovation. Estimates for a sample of NYSE issues suggest: a trade's full price impact arrives only with a protracted lag; the impact is a positive and concave function of the trade size; large trades cause the spread to widen; trades occurring in the face of wide spreads have larger price impacts; and, information asymmetries are more significant for smaller firms.