An Examination of the Relationship between Stock Return and Trading Activity Under Different Trading Systems
Greek Economic Review, Vol. 21, No 1, 19-36, Spring 2001
Posted: 7 Feb 2014
Date Written: 2001
The purpose of the paper is to examine the effects of different trading systems, the open outcry and the electronic systems, which differ in the speed of dissemination of order flow information, on the relation between trading activity and conditional volatility, on the probability distribution of returns, and on the asymmetric impact of news. The paper draws on the experience of the Athens Stock Exchange and finds that the establishment of the automated trading system caused, a) the asymmetric effects to disappear; b) the persistence of volatility to be reduced dramatically; and c) to improve the forecast of trading activity leaving only news to affect volatility.
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