Volume Information in Nikkei and TOPIX Futures Transactions
2017
According to the Kyle (1985) model of informed trading, information in trade size is likely
to effect a permanent price impact. However, two prominent structural models in the
literature do not include trade size in their framework. In this paper, we present a nesting
relationship of major structural models and formulate a generalized model that includes all
trade variables. A new measure to quantify the amount of information in the order flow is
proposed. Our empirical analysis shows that it is indeed the “surprise” in trade size that
contributes significantly in reflecting the price change of Nikkei and TOPIX futures.
Key words: Market microstructure, volume information, futures market
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