Number of Transactions and Volatility: An Empirical Study Using High Frequency Data of Nasdaq Stocks
Regional Engineering College, India
Nanyang Business School
Journal of Financial Research
Our empirical evidence based on transactions data of a sample of Nasdaq stocks indicates that trades of large firms are related to the proxies of marketwide and firm-specific information. For large firms, an increase in the number of trades seems to have a beneficial effect on liquidity as measured by bid-ask spreads. On the other hand, trades of small and medium size firms are associated with firm-specific information and are not related to marketwide information. For small and medium firms, the frequency of trades is positively associated with bid-ask spreads, apparently because of the adverse information content of trades.
JEL Classification: G1, G14Accepted Paper Series
Date posted: March 24, 2000
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