On the occurrence and consequences of inaccurate ... - Acsu Buffalo
On the occurrence and consequences of inaccurate ... - Acsu Buffalo
On the occurrence and consequences of inaccurate ... - Acsu Buffalo
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E.R. Odders-White / Journal <strong>of</strong> Financial Markets 3 (2000) 259}286 283<br />
Fig. 6. Mean abnormal directional imbalance for small trades surrounding bad announcements.<br />
MAD value is <strong>of</strong>ten smaller than <strong>the</strong> Lee <strong>and</strong> Ready value, with a cumulative<br />
di!erence <strong>of</strong> !0.238. In o<strong>the</strong>r words, <strong>the</strong> Lee <strong>and</strong> Ready classi"cation biases<br />
MAD values for small transactions upward (towards buying). Fur<strong>the</strong>rmore, <strong>the</strong><br />
magnitude <strong>of</strong> <strong>the</strong> bias for small transactions is 2.5 times larger than that for large<br />
transactions.<br />
There is additional evidence lending support to trade misclassi"cation as an<br />
explanation for <strong>the</strong> abnormal frequency <strong>of</strong> small purchases. Recall that <strong>the</strong> true<br />
initiator <strong>of</strong> <strong>the</strong> trade could not be determined for roughly 25% <strong>of</strong> <strong>the</strong> transactions<br />
in <strong>the</strong> sample. Consequently, one fourth <strong>of</strong> <strong>the</strong> transactions classi"ed using
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