The accuracy of the tick test: Evidence from the Australian stock exchange

Aitken, Michael; Frino, Alex

doi:10.1016/s0378-4266(96)00008-8

Cited by 86 publications

(60 citation statements)

References 7 publications

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“…Theissen then tests the Lee-Ready algorithm using 9,449 observations and finds that it agrees with the specialist classification for 72.8% of the trades. Aitken and Frino (1996) examine transactions on the Australian Stock Exchange (ASX) for the two-year period ending June 30, 1994. The paper evaluates the performance of only the tick test on its sample of 4,022,339 transactions.…”

Section: Literature Reviewmentioning

confidence: 99%

Short sales and trade classification algorithms

Asquith¹,

Oman²,

Safaya³

2010

Journal of Financial Markets

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This paper demonstrates that short sales are often misclassified as buyer-initiated by the Lee-Ready and other commonly used trade classification algorithms. This result is due in part to regulations which require short sales be executed on an uptick or zero-uptick. In addition, while the literature considers "immediacy premiums" in determining trade direction, it ignores the often larger borrowing premiums which short sellers must pay. Since short sales constitute approximately 30% of all trade volume on U.S. exchanges, these results are important to the empirical market microstructure literature as well as to measures that rely upon trade classification, such as the probability of informed trading (PIN) metric.

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Section: Literature Reviewmentioning

confidence: 99%

Short sales and trade classification algorithms

Asquith¹,

Oman²,

Safaya³

2010

Journal of Financial Markets

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“…The work of Aitken and Frino (1996), hereafter AF, is of particular interest because their ASX data closely resembles key characteristics of our forex data. It is a fully computerized trading system which allows limit and market orders to be matched on price and time priority with no prominent role or privileges for market makers or brokers.…”

Section: Relevant Literaturementioning

confidence: 82%

“…However, these methods do use a combination of the quote rule and the tick test, so our results have some bearing on their potential success in forex research. We frequently compare our results to AF (Aitken and Frino (1996)) because their two years of data on Australian equity also comes from a similar 'trade at quote' automated transparent order book system.…”

Section: Resultsmentioning

confidence: 99%

“…In this regard, the papers of Aitken and Frino (1996) and Chakrabarty et al (2007) are quite relevant to this study. The former examines the tick rule on the automated order matching system for Australian equity (ASX) that has only 'at quote' trades, while the latter examines the tick, LR, EMO (plus their modified EMO) algorithms on newer NASDAQ ECN data.…”

Section: Relevant Literaturementioning

confidence: 99%

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Tick test accuracy in foreign exchange ECN markets

Omrane

Welch

2016

Research in International Business and Finance

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Recent changes in quoting activity have increased the allure of the Tick test because the quote rule and its variants require matching asynchronous trade and quote records. We find Tick test accuracy of forex USD/Euro trades in 2005/6 is 66%. The accuracy falls to 60% for zero tick trades (half the sample), with a disturbing asymmetry between buyer (61%) and seller (70%) initiated trades. We also observe extreme asymmetry for quote changes, where buyer accuracy is 96% (29%) for up (down) quote changes, respectively.JEL classification: G10, F31.

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“…Trade direction is inferred by tracing transactions to the originating party through the use of the NYSE system order file. In an attempt to ensure that each observation has only one active (initiating) party, the authors eliminate stopped market orders, market 'crosses,' and the pairing of market orders with Aitken and Frino (1996) assignments, but it finds that seller-initiated trades are more frequently misclassified than buyer-initiated trades. Aitken and Frino suggest that short sales may be to blame for this misclassification, noting that the ASX is subject to a tick rule similar to those used for many U.S. exchanges 3 .…”

Section: Literature Reviewmentioning

confidence: 99%