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

See all articles by Alex Frino

Alex Frino

University of Wollongong

Reuben Segara

University of Sydney Business School; Financial Research Network (FIRN)

Hui Zheng

Discipline of Finance, The University of Sydney; Capital Markets CRC Limited

Date Written: 2008

Abstract

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

Suggested Citation

Frino, Alex and Segara, Reuben and Zheng, Hui, The impact of trade characteristics on stock return volatility: Evidence from the Australian Stock Exchange (2008). Asia-Pacific Journal of Financial Studies, Vol 38(2): 163-186, 2008, Available at SSRN: https://ssrn.com/abstract=3592018

Alex Frino

University of Wollongong ( email )

Northfields Avenue
Wollongong, New South Wales 2522
Australia

Reuben Segara (Contact Author)

University of Sydney Business School ( email )

Sydney
Australia
+61 2 9351 8790 (Phone)
+61 2 9351 6461 (Fax)

HOME PAGE: http://www.sydney.edu.au/business/about/our-people/academic-staff/reuben-segara.html

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Hui Zheng

Discipline of Finance, The University of Sydney ( email )

P.O. Box H58
Sydney, NSW 2006
Australia
+61 2 9351 3915 (Phone)
+61 2 9351 6461 (Fax)

Capital Markets CRC Limited ( email )

GPO Box 970
55 Harrington Street
Sydney, NSW 2001
Australia

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