The Dynamics of Intraday Trade-time Outcomes

49 Pages Posted: 29 Sep 2016 Last revised: 9 Apr 2018

Yashar H. Barardehi

Chapman University - Argyros School of Business & Economics

Dan Bernhardt

University of Illinois at Urbana-Champaign - Department of Economics

Date Written: March 31, 2018

Abstract

We document the intradaily patterns of return volatility and trading activity in trade times of fixed dollar volumes --- shorter trade times reflect higher trading activity. Unlike the U-shaped intraday seasonality in calendar-time volatility, trade-time volatility plunges by 40-60% over the day: higher calendar-time volatilities near close solely reflect greater trading volumes. Controlling for time-of-day, trade-time volatilities fall sharply as trade times shorten, indicative of endogenous responses of investors to variations in liquidity. Indeed, trade-time volatilities closely proxy ITG's institutional trading cost estimates. We uncover evidence of imperfectly-competitive liquidity provision: price reversals in less active markets but momentum in active ones.

Keywords: Trading Activity, Volatilty, Trade time, Time-of-Day Pattern, Liquidity

JEL Classification: G10, G14, G20

Suggested Citation

Barardehi, Yashar H. and Bernhardt, Dan, The Dynamics of Intraday Trade-time Outcomes (March 31, 2018). Available at SSRN: https://ssrn.com/abstract=2844936 or http://dx.doi.org/10.2139/ssrn.2844936

Yashar Barardehi (Contact Author)

Chapman University - Argyros School of Business & Economics ( email )

Beckman Hall
Argyros School
Orange, CA 92866
United States

HOME PAGE: http://sites.google.com/site/barardehi

Dan Bernhardt

University of Illinois at Urbana-Champaign - Department of Economics ( email )

1206 South Sixth Street
Champaign, IL 61820
United States
217-244-5708 (Phone)

Register to save articles to
your library

Register

Paper statistics

Downloads
65
rank
310,900
Abstract Views
363
PlumX