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Variations in Trading Volume, Return Volatility, and Trading Costs; Evidence on Recent Price Formation Models

Variations in Trading Volume, Return Volatility, and Trading Costs; Evidence on Recent Price... ABSTRACT Patterns in stock market trading volume, trading costs, and return volatility are examined using New York Stock Exchange data from 1988. Intraday test results indicate that, for actively traded firms trading volume, adverse selection costs, and return volatility are higher in the first half‐hour of the day. This evidence is inconsistent with the Admati and Pfleiderer (1988) model which predicts that trading costs are low when volume and return volatility are high. Interday test results show that, for actively traded firms, trading volume is low and adverse selection costs are high on Monday, which is consistent with the predictions of the Foster and Viswanathan (1990) model. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Finance Wiley

Variations in Trading Volume, Return Volatility, and Trading Costs; Evidence on Recent Price Formation Models

The Journal of Finance , Volume 48 (1) – Mar 1, 1993

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References (26)

Publisher
Wiley
Copyright
1993 The American Finance Association
ISSN
0022-1082
eISSN
1540-6261
DOI
10.1111/j.1540-6261.1993.tb04706.x
Publisher site
See Article on Publisher Site

Abstract

ABSTRACT Patterns in stock market trading volume, trading costs, and return volatility are examined using New York Stock Exchange data from 1988. Intraday test results indicate that, for actively traded firms trading volume, adverse selection costs, and return volatility are higher in the first half‐hour of the day. This evidence is inconsistent with the Admati and Pfleiderer (1988) model which predicts that trading costs are low when volume and return volatility are high. Interday test results show that, for actively traded firms, trading volume is low and adverse selection costs are high on Monday, which is consistent with the predictions of the Foster and Viswanathan (1990) model.

Journal

The Journal of FinanceWiley

Published: Mar 1, 1993

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