We investigate the information content of inter-transaction time and find that it varies both across stocks and over time. On average, inter-transaction time is found to be informative whenever stocks are sufficiently traded. The magnitude of the information content is found to be larger for less liquid, but still fairly actively traded stocks. In general, trades arriving quickly move prices more than trades arriving more slowly. Further, the information content of intertransaction time is negatively correlated with proxies for the amount of private information in the trading of a particular stock. We then distinguish between trades in the same direction as the previous trade from trades in the reverse direction and find that the price impact of a trade as well as the information content of inter-transaction time is dependent on trade type. In general, reversing trades are more informative. Further, same-direction trades arriving quickly move prices more than same-direction trades arriving more slowly, but reversing trades arriving quickly move prices less than reversing trades arriving more slowly. According to market microstructure models, prices respond to trades because trades convey information regarding the underlying value of the security. In its simplest interpretation, when traders buy, price rises as market makers revise upward their estimate of the securities tru
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