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Intraday trading volume and international spillover effects

  • Hussain, Syed Mujahid
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    The objective of this paper is to explore whether lagged trading activity in one market contributes to the return and volatility process in other markets, using 5-min concurrent data from German and British equity market. Our results lend support to our initial premise that if international investors have access to the same information set as domestic traders, then after observing foreign trading activity, market makers adjust prices to reflect their expectation of the security value, conditional upon all available information, including prior trades. Our findings clearly indicate that intraday trading volume contains predictive power for cross-border return and volatility processes. Moreover, these volume effects are found to be asymmetric in the sense that the impact of positive volume changes upon foreign stock market volatility is greater than is the impact of negative changes.

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    File URL: http://www.sciencedirect.com/science/article/B7CPK-514Y2FV-1/2/c79f29b10da929e2afaee781ded15ac0
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    Article provided by Elsevier in its journal Research in International Business and Finance.

    Volume (Year): 25 (2011)
    Issue (Month): 2 (June)
    Pages: 183-194

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    Handle: RePEc:eee:riibaf:v:25:y:2011:i:2:p:183-194
    Contact details of provider: Web page: http://www.elsevier.com/locate/ribaf

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    1. Merton, Robert C, 1987. " A Simple Model of Capital Market Equilibrium with Incomplete Information," Journal of Finance, American Finance Association, vol. 42(3), pages 483-510, July.
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    7. Blume, Lawrence & Easley, David & O'Hara, Maureen, 1994. " Market Statistics and Technical Analysis: The Role of Volume," Journal of Finance, American Finance Association, vol. 49(1), pages 153-81, March.
    8. Andersen, Torben G. & Bollerslev, Tim, 1997. "Intraday periodicity and volatility persistence in financial markets," Journal of Empirical Finance, Elsevier, vol. 4(2-3), pages 115-158, June.
    9. Karpoff, Jonathan M., 1987. "The Relation between Price Changes and Trading Volume: A Survey," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 22(01), pages 109-126, March.
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    12. Suominen, Matti, 2001. "Trading Volume and Information Revelation in Stock Market," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 36(04), pages 545-565, December.
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    14. Engle, Robert F & Ito, Takatoshi & Lin, Wen-Ling, 1990. "Meteor Showers or Heat Waves? Heteroskedastic Intra-daily Volatility in the Foreign Exchange Market," Econometrica, Econometric Society, vol. 58(3), pages 525-42, May.
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