Colla, Paolo and Mele, Antonio (2010) Information linkages and correlated trading. Review of Financial Studies, 23 (1). pp. 203-246. ISSN 0893-9454
Full text not available from this repository.Abstract
In a market with informationally connected traders, the dynamics of volume, price informativeness, price volatility, and liquidity are severely affected by the information linkages every trader experiences with his peers. We show that in the presence of information linkages among traders, volume and price informativeness increase. Moreover, we find that information linkages improve or damage market depth, and lower or boost the Traders' profits, according to whether these linkages convey positively or negatively correlated signals. Finally, our model predicts patterns of trade correlation consistent with those identified in the empirical literature: trades generated by “neighbor” traders are positively correlated and trades generated by “distant” traders are negatively correlated.
| Item Type: | Article |
|---|---|
| Official URL: | http://rfs.oxfordjournals.org/ |
| Additional Information: | © 2009 The Authors |
| Divisions: | Finance |
| Subjects: | H Social Sciences > HF Commerce |
| Date Deposited: | 08 Feb 2011 11:52 |
| Last Modified: | 20 Nov 2024 02:30 |
| URI: | http://eprints.lse.ac.uk/id/eprint/32266 |
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