Abstract

http://ssrn.com/abstract=884585
 
 

References (34)



 
 

Citations (11)



 


 



Trading Activity and Stock Price Volatility: Evidence from the London Stock Exchange


Roger D. Huang


University of Notre Dame

Ronald W. Masulis


University of New South Wales - Australian School of Business; European Corporate Governance Institute (ECGI); Financial Research Network (FIRN)


Journal of Empirical Finance, Vol. 10, No. 3, pp. 249-269, 2003

Abstract:     
Analysis of FTSE 100 stock transactions data reported by the London Stock Exchange shows that trade frequency and average trade size impact price volatility for small trades (i.e. trades of one NMS or less). For large trades, only trade frequency affects price volatility. In further splitting small trades by relative size, trade frequency and average trade size are found to affect price volatility only for trades close to stocks' maximum guaranteed quoted depth. This evidence is consistent with microstructure models of dealer inventory adjustment and strategic behavior by informed traders, where dealers and uninformed traders face adverse selection costs.

Number of Pages in PDF File: 39

Keywords: Trading size, trading frequency, price volatility, London Stock Exchange, transactions data, informed trading, market microstructure models

JEL Classification: G14, G12

Accepted Paper Series


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Date posted: February 26, 2006  

Suggested Citation

Huang, Roger D. and Masulis, Ronald W., Trading Activity and Stock Price Volatility: Evidence from the London Stock Exchange. Journal of Empirical Finance, Vol. 10, No. 3, pp. 249-269, 2003. Available at SSRN: http://ssrn.com/abstract=884585

Contact Information

Roger D. Huang (Contact Author)
University of Notre Dame ( email )
Mendoza College of Business
Notre Dame, IN 46556-5646
United States
574-631-6370 (Phone)
Ronald W. Masulis
University of New South Wales - Australian School of Business ( email )
Sydney, NSW 2052
Australia
612-9385-5860 (Phone)
612-9385-6347 (Fax)

European Corporate Governance Institute (ECGI) ( email )
c/o ECARES ULB CP 114
B-1050 Brussels
Belgium
Financial Research Network (FIRN)
C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia
HOME PAGE: http://www.firn.org.au

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