We examine the informational roles of trades and time between trades in the domestic and overseas US Treasury markets. A vector autoregressive model is employed to assess the information content of trades and time duration between trades. We find significant impacts of trades and time duration between trades on price changes. Larger trade size induces greater price revision and return volatility, and higher trading intensity is associated with a greater price impact of trades, a faster price adjustment to new information and higher volatility. Higher informed trading and lower liquidity contribute to larger bid–ask spreads off the regular daytime trading period.
We thank Hendrik Bessembinder, Ken Kavajecz, and Raja Velu for their helpful comments.
Chen, P.H., Man, K., Wang, J. and Wu, C. (2019), "The Role of Duration and Trades in the Information Assimilation Process of the US Treasury Market", Advances in Pacific Basin Business, Economics and Finance (Advances in Pacific Basin Business, Economics and Finance, Vol. 7), Emerald Publishing Limited, Bingley, pp. 155-200. https://doi.org/10.1108/S2514-465020190000007007
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