Recent Growth in NASDAQ Trading Volume and its Relation to Market Volatility
Posted: 20 Aug 1999
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: Suggested Citation