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The Dynamics of Intraday Trade Time Outcomes

50 Pages Posted: 29 Sep 2016 Last revised: 7 Sep 2017

Yashar H. Barardehi

Ohio University - Department of Economics

Dan Bernhardt

University of Illinois at Urbana-Champaign - Department of Economics

Date Written: September 5, 2017

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 (September 5, 2017). Available at SSRN: https://ssrn.com/abstract=2844936

Yashar Heydari Barardehi (Contact Author)

Ohio University - Department of Economics ( email )

319 Bentley Annex
Athens, OH 45701-2979
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)

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