The Determinants of Securities Trading Activity: Evidence from Four European Equity Markets

23 Pages Posted: 22 Jul 2019

See all articles by Silvio John Camilleri

Silvio John Camilleri

University of Malta - Department of Banking and Finance - FEMA

Francelle Galea

University of Malta - Banking and Finance Dept. - FEMA

Date Written: July 20, 2019

Abstract

Purpose

The main objective of this study is to obtain new empirical evidence about the connections between equity trading activity and five possible liquidity determinants: market capitalisation, dividend yield, earnings yield, company growth, and the distinction between recently-listed firms as opposed to more established ones.

Design / Methodology / Approach

We use a sample of 172 stocks from four European markets and estimate models using the entire sample data and different sub-samples to check the relative importance of the above determinants. We also conduct a factor analysis to re-classify the variables into a more succinct framework.

Findings

The evidence suggests that market capitalisation is the most important trading activity determinant, and the number of years listed ranks thereafter.

Research limitations / implications

The positive relation between trading activity and market capitalisation is in line with prior literature, while the findings relating to the other determinants offer further empirical evidence which is a worthy addition in view of the contradictory results in prior research.

Practical implications

This study is of relevance to practitioners who would like to understand the cross-sectional variation in stock liquidity at a more detailed level.

Originality / value

The originality of the paper rests on two important grounds: (a) we focus on trading turnover rather than on other liquidity proxies, since the former is accepted as an important determinant of the liquidity generation process, and (b) we adopt a rigorous approach towards checking the robustness of the results by considering various sub-sample configurations.

Keywords: Dividend yield, European equity markets, Factor analysis, Liquidity, Liquidity determinants, Market capitalisation, Newly established firms, Securities markets, Trading activity

JEL Classification: G10, G12, G15

Suggested Citation

Camilleri, Silvio John and Galea, Francelle, The Determinants of Securities Trading Activity: Evidence from Four European Equity Markets (July 20, 2019). Available at SSRN: https://ssrn.com/abstract=3423343 or http://dx.doi.org/10.2139/ssrn.3423343

Silvio John Camilleri (Contact Author)

University of Malta - Department of Banking and Finance - FEMA ( email )

Msida MSD 2080
Msida MSD 06
Malta

Francelle Galea

University of Malta - Banking and Finance Dept. - FEMA ( email )

Malta

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