Variations in Trading Volume, Return Volatility, and Trading Costs; Evidence on Recent Price Formation Models

Published

Journal Article

Patterns in stock market trading volume, trading costs, and return volatility are examined using New York Stock Exchange data from 1988. Intraday test results indicate that, for actively traded firms trading volume, adverse selection costs, and return volatility are higher in the first half‐hour of the day. This evidence is inconsistent with the Admati and Pfleiderer (1988) model which predicts that trading costs are low when volume and return volatility are high. Interday test results show that, for actively traded firms, trading volume is low and adverse selection costs are high on Monday, which is consistent with the predictions of the Foster and Viswanathan (1990) model. 1993 The American Finance Association

Full Text

Duke Authors

Cited Authors

  • FOSTER, FD; VISWANATHAN, S

Published Date

  • January 1, 1993

Published In

Volume / Issue

  • 48 / 1

Start / End Page

  • 187 - 211

Electronic International Standard Serial Number (EISSN)

  • 1540-6261

International Standard Serial Number (ISSN)

  • 0022-1082

Digital Object Identifier (DOI)

  • 10.1111/j.1540-6261.1993.tb04706.x

Citation Source

  • Scopus