The Impact of Competition and Information on Intraday Trading

39 Pages Posted: 1 Feb 2008 Last revised: 10 Jan 2014

See all articles by Katya Malinova

Katya Malinova

McMaster University - Michael G. DeGroote School of Business

Andreas Park

University of Toronto; University of Toronto - Finance Area

Date Written: July 30, 2013

Abstract

In a dynamic model of financial market trading multiple heterogeneously informed traders choose when to place orders. Better informed traders trade immediately, worse informed delay even though they expect the public expectation to move against them. This behavior causes distinct patterns with decreasing spreads and probability of informed trading (PIN) and increasing volume. Competition increases market participation and volume, and it causes more pronounced spread and less pronounced volume patterns. Systematic improvements in information increase spreads, volume, and market participation. Very short-lived private information inverts the volume pattern.

Keywords: Trading, Market Participation, Intraday Patterns, Heterogeneous Information

JEL Classification: G10, G14

Suggested Citation

Malinova, Katya and Park, Andreas, The Impact of Competition and Information on Intraday Trading (July 30, 2013). Available at SSRN: https://ssrn.com/abstract=1088832 or http://dx.doi.org/10.2139/ssrn.1088832

Katya Malinova

McMaster University - Michael G. DeGroote School of Business ( email )

1280 Main Street West
Hamilton, Ontario L8S 4M4
Canada

Andreas Park (Contact Author)

University of Toronto ( email )

105 St George Street
Toronto, Ontario M5S 3G8
Canada

University of Toronto - Finance Area ( email )

Toronto, Ontario M5S 3E6
Canada

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