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An Intraday Analysis of the Probability of Trading on the ASX at the Asking Price
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Michael Aitken, Amaryllis Kua, Philip Brown, Terry Walter and H.Y. Izan
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Abstract
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We explain the probability of a trade at the asking price across time. The database contains intraday bid-ask quotes and transaction prices on the Australian Stock Exchange. We find systematic patterns in the probability of a trade at the asking price, corresponding to previously documented return anomalies, including the day-of-week, end-of-day and turn-of-year anomalies. The probability is higher when a trade is of lower dollar volume, lower buy-order imbalance, lower bid-ask spread, when it is a trade of a smaller firm, a trade of a stock with higher trading frequency, higher price level, and the security is approved for short selling.
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Keywords
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TRADES AT THE ASK PRICE; INTRADAY RETURNS; MICROSTRUCTURE; ANOMALIES
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Contact Details
Michael Aitken
Department of Finance
University of Sydney
NSW 2006
Amaryllis Kua
Department of Accounting and Finance
University of Western Australia
WA 6907
Philip Brown
Department of Accounting and Finance
University of Western Australia
WA 6907
Terry Walter
Department of Accounting
University of Sydney
NSW 2006
H.Y. Izan
Department of Accounting and Finance
University of Western Australia
WA 6907
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This project was funded by a collaborative research grant between the Australian Research Council and the Australian Stock Exchange (ASX). The project would not have been possible without the generous help of the ASX which, through its Surveillance Division, made the SEATS data available to us. We acknowledge the programming skill of Jennifer Cross and Paul Vowles. The paper has benefited from comments made by participants at workshops at the University of New South Wales and the University of Auckland. Alex Frino, Denzil Fiebig and two anonymous referees provided detailed comments on aspects of the paper.
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