1.4. Computación de altas prestaciones
1.4.1. Arquitecturas paralelas
8.1 Summary
P
revious research in the U.S. has shown that the probability of a trade at the askis related to the time of day and the price level. This paper is the first in Australia that looks into this area of research. Our main aim was to explore time- related differences in the probability of a trade at the asking price, for instance across time and days of the week, and their relationship to intraday average rates of return. In addition, other determinants of the probability are examined.
We demonstrate that systematic intraday patterns in mean returns, ranging from the end-of-day to the size anomaly, can be related to patterns in the probability of a trade at the asking price. This observation helps us to interpret the anomalies literature and potentially has broad implications for how we interpret event studies, particularly where events are concentrated on a particular day of the week or time of day.
The probability of a trade at the asking price was significantly related to seven factors other than the time of day: it was inversely related to dollar volume of the trade, buy order imbalance, bid-ask spread and firm size; and directly related to the average trading frequency in the stock, its price level, and whether the stock is approved for short selling.
8.2 Suggestions for Future Research
This paper could be refined in various ways.
First, the fact that we correctly predict 53.3% of trades means that there is a sizeable random element in whether the next trade will be at the ask, as well as several other explanatory variables which are omitted from our model. Four factors potentially important are risk, the depth of the bid-ask schedule, movements in interest rates across time and trading by informed market agents. These are all related to changes in demand for a stock.
McInish and Wood (1992) found that the level of the bid-ask spread is directly related to both differential risks across stocks and differential risks across time intervals of a trading day. Although risk may partly be inferred from the bid- ask spread, other risk dimensions are not captured.
Interest rates movements could affect the decision of investors to hold stocks instead of bonds. Thus, when there is an upward shift in the interest rate, we
investors attempt to sell stocks to buy bonds. Likewise, the presence of informed traders would push the probability up or down, depending on whether they were buyers or sellers. A greater proportion of market buy orders implies a greater demand for stock. It would be interesting to see if the number of market orders, relative to the number of limit orders, is relevant. These variables might not be effectively captured in our proxy, order imbalance.
Our robustness tests across years strongly indicate a significantly larger probability of a trade at the asking price in the 1991–1992 period. We presume this was caused by some macroeconomic factors, such as changes in interest rates.
Holiday effects could be taken into account by the inclusion of a sub-sample pre-holiday period. Following this, the U.S. explanation of the holiday anomalies, through a change in the probability of a trade at the asking price, could be confirmed.
We leave these refinements to a future paper.
(Date of receipt of final typescript: November 1995.)
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