Market Closings and Concentration of Stock Trading: An Empirical Analysis

Abstract

We adopt a power law framework to measure the concentration of daily trading among the different stocks on the US market. Our analysis of the trends of daily concentration over the last five decades reveals that trading concentration is lower on Mondays and the day after a long weekend. These findings are supportive of the hypothesis that firms manage information release. We also find lower concentration at the end of December and in January. The results are consistent with our expectations for a stock market that comprises multiple groups of traders with unique trading behavior and timing patterns.

Keywords: trading concentration; power law; weekend effect; Zipf distribution

JEL Classification: G10; H30; D10