What's not there: Odd lots and market data

Publication Type:
Journal Article
Journal of Finance, 2014, 69 (5), pp. 2199 - 2236
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© 2014 the American Finance Association. We investigate odd-lot trades in equity markets. Odd lots are increasingly used in algorithmic and high-frequency trading, but are not reported to the consolidated tape or in databases such as TAQ. In our sample, the median number of odd-lot trades is 24% but in some stocks odd lots are 60% or more of trading. Odd-lot trades contribute 35% of price discovery, consistent with informed traders using odd lots to avoid detection. Omitting odd-lot trades leads to inaccuracies in order imbalance measures and makes sentiment measures unreliable. Excluding odd lots from the consolidated tape raises important regulatory issues.
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