Daily return volatility, bid-ask spreads, and information flow: Analyzing the information content of volume

Journal of Business

Volumn 79, Issue 5, 2006, Pages 2697-2739

  Jinliang, Li ^a   Chunchi, Wu ^b,c  

^a NORTHEASTERN UNIVERSITY   (United States)

^b SINGAPORE MANAGEMENT UNIVERSITY   (Singapore)

^c SYRACUSE UNIVERSITY   (United States)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 33846013971     PISSN: 00219398     EISSN: None     Source Type: Journal    
DOI: 10.1086/505249     Document Type: Article

References (62)

1. Admati, Anat R., and Paul Pfleiderer. 1988. A theory of intraday patterns: Volume and price variability. Review of Financial Studies 1 (Spring): 3-40.
2. Akaike, Hirotugu. 1969. Fitting autoregressions for prediction. Annals of the Institute of Statistical Mathematics 21:243-47.
3. Andersen, Torben G. 1996. Return volatility and trading volume: An information flow interpretation of stochastic volatility. Journal of Finance 51 (March): 169-204.
4. Andersen, Torben G., and Tim Bollerslev. 1997a. Heterogeneous information arrivals and return volatility dynamics: Uncovering the long run in high-frequency returns. Journal of Finance 52 (July): 975-1005.
5. _. 1997b. Intraday periodicity and volatility persistence in financial markets. Journal of Empirical Finance 4, nos. 2-3:115-58.
6. _. 1998. Deutsche mark-dollar volatility: Intraday activity patterns, macroeconomic announcements, and longer run dependencies. Journal of Finance 53 (February): 219-65.
7. Barclay, Michael, and Jerold Warner. 1993. Stealth trading and volatility: Which trades move prices. Journal of Financial Economics 34 (December): 281-305.
8. Bessembinder, Hendrik. 1999. Trade execution costs on Nasdaq and the NYSE: A post-reform comparison. Journal of Financial and Quantitative Analysis 34 (September): 387-407.
9. Bessembinder, Hendrik, and Herbert M. Kaufman. 1997. A comparison of trade execution costs for NYSE and Nasdaq-listed stocks. Journal of Financial and Quantitative Analysis 32 (September): 287-310.
10. Bickel, Peter J., and Kjell A. Doksum. 1977. Mathematical statistics: Basic ideas and selected topics. San Francisco: Holden-Day.
11. Black, Fischer. 1971. Towards a fully automated exchange, part I. Financial Analysts Journal 27:29-34.
12. Chan, Kalok, and Wai-Ming Fong. 2000. Trade size, order imbalance, and the volatility-volume relation. Journal of Financial Economics 57 (August): 247-73.
13. Chordia, Tarun, Richard Roll, and Avanidhar Subrahmanyam. 2000. Commonality in liquidity. Journal of Financial Economics 56 (April): 3-28.
14. _. 2001. Market liquidity and trading activity. Journal of Finance 56 (April): 501-30.
15. _. 2002. Order imbalance, liquidity and market returns. Journal of Financial Economics 65 (July): 111-30.
16. Clark, Peter K. 1973. A subordinated stochastic process model with finite variance for speculative prices. Econometrica 41 (January): 135-55.
17. Daigler, Robert T., and Marilyn K. Wiley. 1999. The impact of trader type on the futures volatility-volume relation. Journal of Finance 54 (December): 2297-2316.
18. Dickey, David, and Wayne A. Fuller. 1979. Distribution of the estimates for autoregressive time series with a unit root. Journal of the American Statistical Association 74 (June): 427-31.
19. Dufour, Alfonso, and Robert F. Engle. 2000. Time and the price impact of a trade. Journal of Finance 55 (December): 2467-98.
20. Easley, David, Soeren Hvidkjaer, and Maureen O'Hara. 2002. Is information risk a determinant of asset returns? Journal of Finance 57 (October): 2185-2221.
21. Easley, David, Nicholas M. Kiefer, and Maureen O'Hara. 1997a. The information content of the trading process. Journal of Empirical Finance 4, nos. 2-3:159-86.
22. _1997b. One day in the life of a very common stock. Review of Financial Studies 10 (Autumn): 805-35.
23. Easley, David, Nicholas M. Kiefer, Maureen O'Hara, and Joseph B. Paperman. 1996. Liquidity, information, and infrequently traded stocks. Journal of Finance 51 (September): 1405-36.
24. Easley, David, Maureen O'Hara, and Joseph B. Paperman. 1998. Financial analysts and information-based trade. Journal of Financial Markets 1 (August): 175-201.
25. Easley, David, Maureen O'Hara, and Gideon Saar. 2001. How stock splits affect trading: A microstructure approach. Journal of Financial and Quantitative Analysis 36 (March): 25-51.
26. Easley, David, Maureen O'Hara, and P. S. Srinivas. 1998. Option volume and stock prices: Evidence on where informed traders trade. Journal of Finance 53 (April): 431-65.
27. Epps, Thomas W., and Mary L. Epps. 1976. The stochastic dependence of security price changes and transaction volumes: Implications for the mixture-of-distributions hypothesis. Econometrica 44 (March): 305-21.
28. Foster, F. Douglas, and S. Viswanathan. 1990. A theory of intraday variations in volumes, variances and trading costs in securities markets. Review of Financial Studies 3, no. 4:593-624.
29. _. 1995. Can speculative trading explain the volume-volatility relation? Journal of Business and Economic Statistics 13 (October): 379-96.
30. Gallant, A. Ronald, Peter E. Rossi, and George E. Tauchen. 1992. Stock prices and volume. Review of Financial Studies 5, no. 2:199-242.
31. George, Thomas J., Gautam Kaul, and M. Nimalendran. 1991. Estimation of the bid-ask spread and its components: A new approach. Review of Financial Studies 4, no. 4:623-56.
32. Glosten, Lawrence R., and Lawrence Harris. 1988. Estimating the components of the bid-ask spread. Journal of Financial Economics 21:123-42.
33. Glosten, Lawrence R., and Paul R. Milgrom. 1985. Bid, ask, and transaction prices in a specialist market with heterogeneously informed traders. Journal of Financial Economics 14 (March): 71-100.
34. Grundy, Bruce D., and Maureen McNichols. 1989. Trade and revelation of information through prices and direct disclosure. Review of Financial Studies 2, no. 4:495-526.
35. Hansen, Lars Peter. 1982. Large sample properties of generalized method of moments estimators. Econometrica 50 (July): 1029-54.
36. Harris, Lawrence. 1986. Cross-security tests of the mixture of distributions hypothesis. Journal of Financial and Quantitative Analysis 21 (March): 39-46.
37. _. 1987. Transaction data tests of the mixture of distributions hypothesis. Journal of Financial and Quantitative Analysis 22 (June): 127-41.
38. _. 1994. Minimum price variations, discrete bid-ask spreads, and quotation sizes. Review of Financial Studies 1 (Spring): 149-78.
39. Heidle, Hans G., and Roger D. Huang. 2002. Information-based trading in dealer and auction markets: An analysis of exchange listings. Journal of Financial and Quantitative Analysis 37 (September): 391-425.
40. Heimstra, Craig, and Jonathan D. Jones. 1994. Testing for linear and nonlinear Granger causality in the stock price-volume relation. Journal of Finance 49 (December): 1639-64.
41. Holthausen, Robert, and Robert Verrecchia. 1990. The effect of informedness and consensus on price and volume behavior. Accounting Review 65 (January): 191-208.
42. Huang, Roger D., and Hans R. Stoll. 1997. The components of the bid-ask spread: A general approach. Review of Financial Studies 10 (Winter): 995-1034.
43. Jones, Charles M., Gautam Kaul, and Marc L. Lipson. 1994. Transactions, volume and volatility. Review of Financial Studies 7 (Winter): 631-51.
44. Kim, Oliver, and Robert E. Verrecchia. 1991. Market reactions to anticipated announcements. Journal of Financial Economics 30 (December): 273-310.
45. _. 1994. Market liquidity and volume around earnings announcements. Journal of Accounting and Economics 17 (January): 41-67.
46. _. 1997. Pre-announcement and event-period information. Journal of Accounting and Economics 24 (December): 395-419.
47. Kyle, Albert S. 1985. Continuous auctions and insider trading. Econometrica 53 (November): 1315-36.
48. Lamoureux, Christopher G., and William D. Lastrapes. 1994. Endogenous trading volume and momentum in stock-return volatility. Journal of Business and Economic Statistics 12 (April): 253-60.
49. Lawrance, A. J., and N. T. Kottegoda. 1977. Stochastic modeling of riverflow time series. Journal of the Royal Statistical Association A 140, no. 1:1-47.
50. Lee, Charles M. C., and Mark Ready. 1991. Inferring trade direction from intraday data. Journal of Finance 46 (June): 733-46.
51. Madhavan, Ananth. 1995. Consolidation, fragmentation, and the disclosure of trading information. Review of Financial Studies 8 (Autumn): 579-603.
52. Madhavan, Ananth, Matthew Richardson, and Mark Roomans. 1997. Why do security prices change? A transaction-level analysis of NYSE stocks. Review of Financial Studies 10 (Winter): 1035-64.
53. Man, Kasing. 2003. Long memory time series and short term forecasts. International Journal of Forecasting 19:477-91.
54. Newey, Whitney K., and Kenneth D. West. 1987. A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix. Econometrica 55 (May): 703-8.
55. O'Hara, Maureen. 1995. Market microstructure theory. Cambridge: Blackwell.
56. Peiers, Bettina. 1997. Informed traders, intervention and price leadership: A deeper view of the microstructure of the foreign exchange market. Journal of Finance 52 (September): 1589-1614.
57. Phillips, Peter, and Pierre Perron. 1988. Testing for a unit root in time-series regression. Biometrica 75 (June): 335-46.
58. Richardson, Matthew, and Tom Smith. 1994. A direct test of the mixture of distributions hypothesis: Measuring the daily flow of information. Journal of Financial and Quantitative Analysis 29 (March): 101-16.
59. Schwarz, Gideon. 1978. Estimating the dimension of a model. Annals of Statistics 6 (March): 461-64.
60. Shalen, Catherine T. 1993. Volume, volatility and the dispersion of beliefs. Review of Financial Studies 6, no. 2:405-34.
61. Tauchen, George E., and Mark Pitts. 1983. The price variability-volume relationship on speculative markets. Econometrica 51 (March): 485-505.
62. Tinic, Seha M., and Richard R. West. 1979. Investing in securities: An efficient markets approach. Reading, MA: Addison-Wesley.