Recent Growth in NASDAQ Trading Volume and its Relation to Market Volatility

Posted: 20 Aug 1999

See all articles by Steven Freund

Steven Freund

University of Massachusetts Lowell - Department of Finance

Gwendolyn P. Webb

City University of New York (CUNY) - Baruch College - Zicklin School of Business

Abstract

We document a significant increase in Nasdaq trading volume relative to that on the New York Stock Exchange (NYSE) and the American Stock Exchange (AMEX). Although recent increases in the number of shares traded are reported in the financial press, we also find it present in the percentage of dollar values traded. We then examine correlations between trading volume and several measures of market volatility. Nasdaq volume appears to be more closely correlated with residual variance, while NYSE and AMEX volumes are more closely correlated with overall market variance. We conclude that the type and quantity of information driving trading are different on Nasdaq than on the two exchanges, and that the relative growth in Nasdaq volume cannot be attributed solely to differences in the methods of counting volume in the two market environments.

JEL Classification: G12

Suggested Citation

Freund, Steven and Webb, Gwendolyn P., Recent Growth in NASDAQ Trading Volume and its Relation to Market Volatility. Available at SSRN: https://ssrn.com/abstract=168595

Steven Freund (Contact Author)

University of Massachusetts Lowell - Department of Finance ( email )

Lowell, MA 01854
United States

Gwendolyn P. Webb

City University of New York (CUNY) - Baruch College - Zicklin School of Business ( email )

Department of Economics & Finance
P.O. Box B13-289 1 Bernard Baruch Way
New York, NY 10010
United States
646-312-3485 (Phone)

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