Individual investors' trading activities and price volatility

Huu Nhan Duong, Petko Stefanov Kalev

    Research output: Chapter in Book/Report/Conference proceedingChapter (Book)Researchpeer-review

    2 Citations (Scopus)

    Abstract

    We investigate the volume-volatility relation and the effect of the number of trades and average trade size, institutional and individual trading, and order imbalance on price volatility. We document a positive relation between trading volume and volatility for stocks traded on the Australian Securities Exchange (ASX). We further show that the number of trades has a more significant effect on price volatility than average trade size. When the number of trades is decomposed into the number of trades of different sizes, the number of trades in the medium size category often has the most significant impact on volatility. The trading activity of both institutions and individuals are positively related to volatility, with individual trading has a more significant role in explaining price volatility than institutional trading. Finally, we document that on the ASX (a pure limit order book market) order imbalance - however it is important in explaining the volume-volatility dynamics - it is not the main factor driving this relation.
    Original languageEnglish
    Title of host publicationMarket Microstructure and Nonlinear Dynamics: Keeping Financial Crisis in Context
    EditorsGilles Dufrenot, Fredj Jawadi, Wael Louhichi
    Place of PublicationSwitzerland
    PublisherSpringer
    Pages155 - 188
    Number of pages34
    ISBN (Print)9783319052120
    DOIs
    Publication statusPublished - 2014

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