Price, Trade Size, and Information Revelation in Multi-Period Securities Markets

35 Pages Posted: 31 May 2006 Last revised: 25 Apr 2015

See all articles by Han N. Ozsoylev

Han N. Ozsoylev

Ozyegin University

Shino Takayama

University of Sydney Business School

Date Written: May 1, 2006

Abstract

We study price formation in securities markets, using the sequential trade framework of Glosten and Milgrom (1985). This paper makes one basic methodological advance over previous research on sequential securities trading: we allow traders to choose from n trade sizes in a multi-period market, where n can be arbitrarily large. We examine how trade size multiplicity affects the intertemporal dynamics of trading strategies, bid-ask spreads, and information revelation. We show that price impact, as a function of trade size, is increasing and exhibits (discrete) concavity.

Keywords: Market microstructure, Glosten-Milgrom, Price formation, Sequential trade, Asymmetric information, Trade size, Bid-ask spreads

JEL Classification: D82, G12

Suggested Citation

Ozsoylev, Han N. and Takayama, Shino, Price, Trade Size, and Information Revelation in Multi-Period Securities Markets (May 1, 2006). Journal of Financial Markets, Vol. 13, No. 1, 2010, Available at SSRN: https://ssrn.com/abstract=905124 or http://dx.doi.org/10.2139/ssrn.905124

Han N. Ozsoylev (Contact Author)

Ozyegin University ( email )

Kusbakisi Cd. No: 2
Altunizade, Uskudar
Istanbul, 34662
Turkey

Shino Takayama

University of Sydney Business School ( email )

Cnr. of Codrington and Rose Streets
Sydney, NSW 2006
Australia

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