Return Volatility, Cross-Sectional Dispersion, and Trading Activity in the Equity and Futures Markets

Posted: 14 Sep 1999

See all articles by Hendrik Bessembinder

Hendrik Bessembinder

Arizona State University

Kalok Chan

CUHK Business School

Paul J. Seguin

University of Minnesota - Twin Cities - Carlson School of Management

Date Written: September 1993

Abstract

Several studies provide theoretic analysis of agents' motivations for trading in financial markets. Broadly speaking, these studies imply that trading volume results from (i) information flows, (ii) cross-sectional differences in agents' assessment of value, and (iii) agents' random liquidity needs. In this study, we test some implications of these theories. We provide specific empirical evidence on relations between trading volumes in both the spot equity market and the equity index futures market, and proxies for market wide information flow, security specific information flow, and cross-sectional divergences in traders' opinions. The empirical results are generally consistent with the implications arising from the theoretic models.

JEL Classification: G14

Suggested Citation

Bessembinder, Hendrik (Hank) and Chan, Kalok and Seguin, Paul J., Return Volatility, Cross-Sectional Dispersion, and Trading Activity in the Equity and Futures Markets (September 1993 ). Available at SSRN: https://ssrn.com/abstract=5406

Hendrik (Hank) Bessembinder

Arizona State University ( email )

PO Box 873906
Tempe, AZ 85207
United States

Kalok Chan

CUHK Business School ( email )

Hong Kong
852 3943 9988 (Phone)

Paul J. Seguin (Contact Author)

University of Minnesota - Twin Cities - Carlson School of Management ( email )

19th Avenue South
Minneapolis, MN 55455
United States
(612) 626-7861 (Phone)

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