Intraday Stealth Trading: Which Trades Move Prices During Periods of High Volume?

Abstract

Research documents a U-shaped intraday pattern of returns. We examine which trade sizes drive the U-shaped pattern and find that intraday price changes from larger trades exhibit a U-shaped pattern whereas price changes from smaller trades show a reverse U-shaped pattern. We argue that price changes from smaller trades are higher during the middle of the day because informed investors break up their trades to disguise their information when intraday volume is low. Price changes from larger trades are likely higher at the beginning and end of the day because high volume allows informed investors to increase their trade size without revealing their information to the market.

What drives the volume–volatility relationship on Euronext Paris?

“…Jain and Joh (1985), Blau, Van Ness, and Van Ness (2009) and Harju and Hussain (2011) highlight heavy market activity in the beginning and the end of the trading day. To account for this phenomenon, we include two dummy variables in the conditional volatility equation.…”

Are directors’ dealings informative? Evidence from European stock markets

“…Nevertheless, we assume that even in a not anonymous market, insiders might hide (at least to some extent) behind several mediumsize trades rather than executing one large block transaction. For further discussion on the "stealth trading" hypothesis, see Friederich et al (2002), Blau et al (2009) and Lebedeva et al (2009). 28 See also Giamouridis et al (2008).…”

Information Content in Small and Large Trades

“…Hughen and McDonald (2006) find evidence of commonality in order flow for small and medium but not for large trades. Finally, Blau et al . (2009) find evidence of large (small) trades displaying ‘U’ (reverse ‘U’) intraday returns.…”