Estimating the Proportion of Informed Trade in Call Auctions

Juan Raposo (1) , Fabrice Riva (1) , Francisco Sogorb (2) , Jos van Bommel (3)

1 DRM - Dauphine Recherches en Management
2 Universidad Cardenal Herrera-CEU
3 Luxembourg School of Finance

We show that the distribution of trading volume in call auctions is indicative of the proportion of informed trade. We use the Kyle (1985) model to predict the shape of the volume distribution as a function of the proportion of informed trade. If most liquidity demanders are uninformed, there is likely to be significant wash trade among them, resulting in Normal-like volume distributions. If most liquidity demanders are informed, their trades are correlated so that the volume distribution is skewed and has a higher coefficient of variation.

Mots clés: market microstructure; liquidity; call auctions

Domaines: Gestion et management

Juan Raposo, Fabrice Riva, Francisco Sogorb, Jos van Bommel. Estimating the Proportion of Informed Trade in Call Auctions. 2011. ⟨halshs-00696342⟩