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The elusive nature of motives to trade: Evidence from international stock markets

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  • Gębka, Bartosz
  • Serwa, Dobromił

Abstract

We analyse investors' motives for trading on stock markets in G-7 countries and investigate whether evidence for these motives is robust when time-varying market volatility, changes between calm and turbulent periods, and existence of international financial spillovers are controlled for. By applying the Markov-switching GARCH specification to a model of the dynamic return–volume relationship, we find that trades conducted due to liquidity needs or driven by private information cannot be identified unequivocally in any market, and positive feedback trading becomes predominant when return spillovers from the US market are taken into account.

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  • Gębka, Bartosz & Serwa, Dobromił, 2015. "The elusive nature of motives to trade: Evidence from international stock markets," International Review of Financial Analysis, Elsevier, vol. 39(C), pages 147-157.
    • Handle: RePEc:eee:finana:v:39:y:2015:i:c:p:147-157
    DOI: 10.1016/j.irfa.2015.03.001
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    2. Sheng, Xin & Brzeszczyński, Janusz & Ibrahim, Boulis M., 2017. "International stock return co-movements and trading activity," Finance Research Letters, Elsevier, vol. 23(C), pages 12-18.
    3. Hong, KiHoon & Wu, Eliza, 2016. "The roles of past returns and firm fundamentals in driving US stock price movements," International Review of Financial Analysis, Elsevier, vol. 43(C), pages 62-75.

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    More about this item

    Keywords

    Informed trading; Liquidity trading; Feedback trading; Return autocorrelation; Trading volume; Financial spillovers; Contagion;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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