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Trade Duration: Information and Trade Disposition
Author(s) -
Locke Peter R.,
Onayev Zhan
Publication year - 2005
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/j.0732-8516.2005.00095.x
Subject(s) - duration (music) , futures contract , volatility (finance) , disposition effect , profitability index , economics , offset (computer science) , futures market , trade volume , business , econometrics , monetary economics , financial economics , finance , international economics , computer science , art , literature , paleontology , context (archaeology) , biology , programming language
We examine the relation between futures trade duration and profitability, volatility, and volume. The duration of unprofitable trades is longer than that for profitable trades across the day, which is evidence of the disposition effect. Our analysis of profitable and unprofitable trades shows strong intraday volume patterns. Greater proportions of profitable trades are offset at the open and close. During high‐volume periods dealers may use a semi‐fundamental informational advantage, based on their access to order flow signals. Dealers may be able to execute costly inventory‐reducing trades at the end of the day, when their informational advantage is perhaps greatest.