Searching for informed traders in stock markets: The case of Banco Popular
Búsqueda de agentes informados en los mercados bursátiles: El caso del Banco Popular



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Pérez Rodríguez, Jorge and Sosvilla-Rivero, Simon and Andrada Felix, Julian and Gómez Déniz, Emilio (2022) Searching for informed traders in stock markets: The case of Banco Popular. North American Journal of Economics and Finance, 63 (101791). ISSN 1062-9408

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In this paper, we use several indicators of trade informativeness to search for informed traders on the final trading days of Banco Popular, the first and only bank resolution case to date in the euro area. In particular, we use the model proposed by Preve and Tse (2013) to estimate the adjusted daily probability of informed trading and the probability of symmetric order-flow shock using high-frequency transaction data. Our empirical results indicate that upon the anticipation of a possible liquidation of the bank, informed investors reacted to the bad news by placing more weight on it and that Banco Popular experienced large increases in both buy- and sell-orders during the last days of trading when the bank registered a significant depletion of its deposit base.
Moreover, we find evidence supporting the presence of inside trading and illiquidity, especially after speculation in the media that the bank could face a liquidation. Our study has important implications for market participants and regulatory authorities.

Item Type:Article
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CRUE-CSIC (Acuerdos Transformativos 2022)

Uncontrolled Keywords:Asymmetric information; Probability of informed trading; Probability of symmetric order-flow shocks; High-frequency data; Bank failure.
Subjects:Social sciences > Economics > Banks and credit unions
Social sciences > Economics > Econometrics
Social sciences > Economics > Finance
JEL:C13, C41, D53, D82, G12, G14
ID Code:74232
Deposited On:31 Aug 2022 10:43
Last Modified:14 Sep 2022 16:07

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