Volatility in US and European Equity Markets: An Assessment of Market Quality
AbstractThe paper examines intra-day share price volatility over the year 2000 for five market centres: the New York Stock Exchange, Nasdaq, the London Stock Exchange, Euronext Paris and Deutsche Borse. In each of these markets, we observe a U-shaped intraday volatility pattern, a particularly sharp spike for the opening half hour, and a general level of intra-day volatility that is accentuated vis-a-vis volatility over longer differencing intervals, e.g. daily and weekly periods. We suggest that the volatility accentuation is attributable to spreads, market impact, price discovery and momentum trading--all of which are either trading costs or exist because of trading costs. Because the magnitude of trading costs depends in part on market design, we also suggest that a link exists between intra-day volatility and market structure, and that market quality/efficiency on both sides of the Atlantic could be improved. Copyright 2002 by Blackwell Publishers Ltd.
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Bibliographic InfoArticle provided by Wiley Blackwell in its journal International Finance.
Volume (Year): 5 (2002)
Issue (Month): 3 (Winter)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=1367-0271
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- Gary Tian & Mingyuan Guo, 2007. "Interday and intraday volatility: Additional evidence from the Shanghai Stock Exchange," Review of Quantitative Finance and Accounting, Springer, vol. 28(3), pages 287-306, April.
- Pagano, Michael S. & Peng, Lin & Schwartz, Robert A., 2008. "The quality of price formation at market openings and closings: Evidence from the Nasdaq stock market," CFS Working Paper Series 2008/45, Center for Financial Studies (CFS).
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