Stealth trading: The case of the Tokyo Stock Exchange

Abstract The stealth trading hypothesis asserts that informed traders trade strategically by breaking up their orders so as to more easily hide among the liquidity traders. Using data for the Tokyo Stock Exchange (TSE), a pure order-driven market, we find evidence that price changes are driven by small- and medium-size trades, with small trades making the greatest contribution to price change relative to their contribution to trading volume. We also find that large trades explain a greater portion of the cumulative price change on high volatility days. Hence, our results support the stealth trading hypothesis for the TSE.