Recent Trends in Trading Activity

58 Pages Posted: 19 Mar 2009 Last revised: 19 Jan 2010

Richard Roll

California Institute of Technology

Avanidhar Subrahmanyam

University of California, Los Angeles (UCLA) - Finance Area; Institute of Global Finance, UNSW Business School; Financial Research Network (FIRN)

Tarun Chordia

Emory University - Department of Finance

Date Written: March 18, 2009

Abstract

We explore the sharp uptrend in trading activity during recent years. Higher turnover has been associated with more frequent smaller trades, which have progressively formed a larger fraction of trading volume over time. Evidence indicates that secular decreases in trading costs have influenced the turnover trend. Turnover has increased the most for stocks with the greatest level of institutional holdings, suggesting professional investing as a key contributor to the turnover trend. Variance ratio tests suggest that more institutional trading has increased information-based trading. The sensitivity of turnover to past returns has increased significantly, revealing a more widespread use of quantitative trading strategies.

Keywords: Trading Volume, Turnover, Liquidity, Institutions, Hedge Funds

JEL Classification: G10, G12

Suggested Citation

Roll, Richard and Subrahmanyam, Avanidhar and Chordia, Tarun, Recent Trends in Trading Activity (March 18, 2009). AFA 2010 Atlanta Meetings Paper. Available at SSRN: https://ssrn.com/abstract=1364006 or http://dx.doi.org/10.2139/ssrn.1364006

Richard W. Roll

California Institute of Technology ( email )

1200 East California Blvd
Mail Code: 228-77
Pasadena, CA 91125
United States
626-395-3890 (Phone)
310-836-3532 (Fax)

Avanidhar Subrahmanyam

University of California, Los Angeles (UCLA) - Finance Area ( email )

Los Angeles, CA 90095-1481
United States
310-825-5355 (Phone)
310-206-5455 (Fax)

Institute of Global Finance, UNSW Business School

Sydney, NSW 2052
Australia

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

Tarun Chordia (Contact Author)

Emory University - Department of Finance ( email )

Atlanta, GA 30322-2710
United States
404-727-1620 (Phone)
404-727-5238 (Fax)

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