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The Relationship among Volatility, Volume, Bid-Ask Spread and Number of Brokers Evidence from Intra-Day Data on the Hong Kong Stock Market

Author

Listed:
  • Hung-Gay Fung

    (School of Business Administration, University of Missouri — St. Louis, Missouri, USA;
    Merrick School of Business, University of Baltimore, Baltimore, Maryland, USA)

  • Chuan-Yang Hwang

    (Department of Finance, Hong Kong University of Science and Technology, Hong Kong, China)

  • Wai-Kin Leung

    (School of Business, University of Hong Kong, Hong Kong, China)

Abstract

This study is the first to use minute-by-minute data to examine thesimultaneousinterrelationship among volatilities, volume, bid-ask spread, and the number of brokers for three actively-traded Hong Kong companies between October 2 and December 29, 1995. The results indicate that high volatility is typically associated with high volume, a large bid-ask spread, and a large number of brokers. Volume is found to be positively related to volatility and negatively related to the number of brokers. This result confirms the observation that large stock trades in Hong Kong are conducted by a small group of brokers who derive business primarily from the institutional investors. More brokers and high volatility tend to increase the bid-ask spread, while high volume decreases it. Finally, we find that the number of participating brokers in the market is positively related to the lagged volatility and negatively related to the lagged volume and bid-ask spread.

Suggested Citation

  • Hung-Gay Fung & Chuan-Yang Hwang & Wai-Kin Leung, 1998. "The Relationship among Volatility, Volume, Bid-Ask Spread and Number of Brokers Evidence from Intra-Day Data on the Hong Kong Stock Market," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 1(03), pages 303-320.
    • Handle: RePEc:wsi:rpbfmp:v:01:y:1998:i:03:n:s021909159800020x
    DOI: 10.1142/S021909159800020X
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    JEL classification:

    • G1 - Financial Economics - - General Financial Markets
    • G2 - Financial Economics - - Financial Institutions and Services
    • G3 - Financial Economics - - Corporate Finance and Governance

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