The Dynamics of Security Trades, Quote Revisions, and Market Depths for Actively Traded Stocks

The Dynamics of Security Trades, Quote Revisions, and Market Depths for Actively Traded Stocks We examine the dynamics of return volatility, trading volume, and depth—in an intraday setting for a sample of actively traded NYSE and NASDAQ stocks. We show that depth is a useful intervening variable and mitigates the impact of trading activity on price volatility. Furthermore, depth is affected by the perception of prevailing information asymmetry between informed and uninformed traders. We demonstrate empirically that the NYSE supplies greater depth under conditions of high, perceived information asymmetry as compared to NASDAQ. NASDAQ makes up for this deficiency by its capability of managing large volume shocks without a major decline in depth. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Quantitative Finance and Accounting Springer Journals

The Dynamics of Security Trades, Quote Revisions, and Market Depths for Actively Traded Stocks

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Publisher
Kluwer Academic Publishers
Copyright
Copyright © 2005 by Springer Science + Business Media, Inc.
Subject
Finance; Corporate Finance; Accounting/Auditing; Econometrics; Operation Research/Decision Theory
ISSN
0924-865X
eISSN
1573-7179
D.O.I.
10.1007/s11156-005-4244-x
Publisher site
See Article on Publisher Site

Abstract

We examine the dynamics of return volatility, trading volume, and depth—in an intraday setting for a sample of actively traded NYSE and NASDAQ stocks. We show that depth is a useful intervening variable and mitigates the impact of trading activity on price volatility. Furthermore, depth is affected by the perception of prevailing information asymmetry between informed and uninformed traders. We demonstrate empirically that the NYSE supplies greater depth under conditions of high, perceived information asymmetry as compared to NASDAQ. NASDAQ makes up for this deficiency by its capability of managing large volume shocks without a major decline in depth.

Journal

Review of Quantitative Finance and AccountingSpringer Journals

Published: Jan 1, 2005

References

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