The Interaction of Retail Order Placement with Transient Volatility
42 Pages Posted: 24 Aug 2009
Date Written: August 24, 2009
This paper investigates the effect of order placement by retail and institutional traders on transient share price volatility on the Australian Stock Exchange (ASX). Using Vector Auto-Regressive models, we find retail traders are attracted to volatile markets but their trading does not increase volatility in subsequent periods. On the other hand, institutional traders are not attracted to volatile markets but there is some evidence that institutional order placement increases market volatility.
Keywords: Institutional and retail traders, Order placement, Transient Volatility
JEL Classification: G10
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