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Intraday Trading Patterns and Commonality in Liquidity

22 Pages Posted: 12 Sep 2011  

Mehmet F. Dicle

Loyola University New Orleans - Joseph A. Butt, S.J. College of Business

Tarun K. Mukherjee

University of New Orleans

Date Written: September 11, 2011

Abstract

A common thread in literature that connects liquidity commonality and intraday trading patterns lies in the potential sources of these two phenomena: inventory risk and asymmetric information. There is ample evidence in literature on trading patterns to suggest that both volume and return volatility are highest during the first and last half hours of a trading day. Thus, one would expect that liquidity commonality would be most concentrated during the intraday trading periods when the trading volume and return volatility are most intense. Therefore, we hypothesize that the degree of liquidity commonality is highest during these two trading periods. We present evidence in support of this hypothesis.

Keywords: Liquidity, commonality, U-shape, intraday trading

JEL Classification: G14, G17

Suggested Citation

Dicle, Mehmet F. and Mukherjee, Tarun K., Intraday Trading Patterns and Commonality in Liquidity (September 11, 2011). Available at SSRN: https://ssrn.com/abstract=1925826 or http://dx.doi.org/10.2139/ssrn.1925826

Mehmet Dicle (Contact Author)

Loyola University New Orleans - Joseph A. Butt, S.J. College of Business ( email )

6363 St. Charles Avenue
New Orleans, LA 70118
United States

HOME PAGE: http://researchforprofit.com

Tarun Mukherjee

University of New Orleans ( email )

2000 Lakeshore Drive
New Orleans, LA 70148
United States

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