You Can’t Always Get What You Want: Trade-Size Clustering and Quantity Choice in Liquidity
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This paper examines whether investors care more about trading their exact quantity demands at some times than at others. Using a new data set of foreign-exchange transactions, I find that customers trade more precise quantities at quarter-end, as evidenced by less trade-size clustering. Customers trade more odd lots and fewer round lots, while the number of trades and total volume are not significantly changed. I also find that the price impact of order flow is greater when customers care more about trading precise quantities. This work sheds new light on trade-size clustering and offers a potential explanation for time-series and cross-sectional variations in common liquidity measures.
liquidity; trade-size clustering; round lots; odd lots; order flow; price impact; foreign exchange
Required Publisher Statement: © Elsevier. Final version published as: Moulton, P. C. (2005). You can’t always get what you want: Trade-size clustering and quantity choice in liquidity. Journal of Financial Economics, 78(1), 89-119. Reprinted with permission. All rights reserved.