The impact of trade characteristics on stock return volatility: Evidence from the Australian Stock Exchange
Asia-Pacific Journal of Financial Studies, Vol 38(2): 163-186, 2008
Posted: 1 Jun 2020
Date Written: 2008
This study examines the impact of trade characteristics on stock return volatility. Using a sample of transaction data from the Australian Stock Exchange, the trading frequency of medium sized trades is found to have the greatest impact on stock return volatility. The result lends support to the stealth trading hypothesis (Barclay and Warner, 1993). After controlling for trading frequency, the average trade size is found to have little explanatory power on price volatility. Stock return volatility is more sensitive to buyer‐initiated trades than seller‐initiated trades, especially so for buyer‐initiated medium sized trades. This finding is consistent with the assertion that information effects are stronger for buys than for sells (Chan and Lakonishok, 1993).
Keywords: Trade Characteristics, Stock Return Volatility, Information Asymmetry, Stealth Trading, Market Microstructure
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