variations in trading volume return volatility and trading costs evidence on recent price formation models patterns in stock market trading volume trading costs and return volatility are examined using new york stock exchange data from 1988 intraday test results indicate that for actively traded firms trading volume adverse selection costs and return volatility are higher in the first half hour of the day this evidence is inconsistent with the admati and pfleiderer 1988 model which predicts that trading costs are low when volume and return volatility are high interday test results show that for actively traded firms trading volume is low and adverse selection costs are high on monday which is consistent with the predictions of the foster and viswanathan 1990 model academics investors and regulators alike are now intensively focused upon understanding the volatility of asset returns and its relation to trading volume this interest was undoubtedly piqued by the market break of october 1987 a time during which volatility and trading volume reached unprecedented levels but even beforehand researchers observed regular differences in the return process for various hours of the day and days of the week research concerning temporal patterns in stock market volatility and volume falls in two groups studies that document observed patterns and studies that develop models to predict patterns among the studies in the first group are oldfield and rogalski 1980 french and roll 1986 stoll and whaley 1990 harris 1986 and wood mcinish and ord 1985 who report evidence on seasonalities in daily and weekly return variances among the regularities that have been documented using interday data is that volatility is higher when the market is open than when it is closed oldfield and rogalski 1980 french and roll 1986 and stoll and whaley 1990 for example point out significant differences in return volatility between trading

market structure and the intraday pattern of bid ask spreads for nasdaq securities this article examines the intraday pattern of bid ask spreads among nasdaq stocks we find that spreads are relatively stable throughout the day but narrow significantly near the close this contrasts with the u shaped pattern for nyse stocks reported by brock and kleidon and mcinish and wood we attribute these divergent patterns to structural differences between specialist and dealer markets the wider spreads for nyse stocks near periods of market closure may reflect the market power of specialists the decline in spreads near the close for nasdaq stocks is consistent with inventory control by individual dealers copyright 1995 by university of chicago press

structural changes in volatility and stock market development evidence for spain abstract in this paper we review the factors that lead to changes in stock market volatility and use alternative methodologies of endogenous breakpoint detection in order to analyze whether the volatility of the spanish stock market has changed significantly over the period 1941 2001 this period corresponds to years of profound development of both the financial and the productive sides of the economy in this country the analysis of the spanish stock market suggests that volatility has behaved in a different manner over the period 1941 2001 after three decades of low volatility a structural break in volatility is detected in 1972 coinciding with the opening of the spanish economy from 1972 to 2001 the years of more intense financial development the stock market presents a higher level of volatility and lower persistence this effect is partly attributable to the increased growth of trading volume brought about by the economic development process

an equilibrium model of asset trading with sequential information arrival in an effort to better understand the dynamic market price adjustment process this paper develops a model which describes the impact of new information on a financial market the primary emphasis is on the price change volume relationship in the presence of a margin requirement we find that the margin requirement significantly affects the relation of price change to volume furthermore this relationship is shown to be affected by the number of investors in the market the degree of information dissemination differences in interpretation of information and the implicit cost of the margin requirement

day of the week effects and asset returns the number of empirical studies using daily stock returns is rapidly increasing researchers generally assume that the distribution of stock returns is identical for all days of the week a convenient statistical assumption but not a necessary condition of market equilibrium nevertheless there are reasons to suspect that the distribution of returns may vary according to the day of the week the most obvious is the impact of weekends on monday s return since monday s return is calculated over three instead of one calender day the mean and variance may well be higher on monday compared with any other daily return perhaps three times as large previous research has examined the daily distribution of stock returns for a monday effect while fama 1965 does not compare daily mean returns he does report that monday s variance is about 20o greater than other daily returns with a traditional distributional assumption regarding the returns on a financial asset specifies that the expected returns are identical for all days of the week contrary to this plausible assumption this paper discovers that the expected returns on common stocks and treasury bills are not constant across days of the week the most notable evidence is for monday s returns where the mean is unusually low or even negative several explanations of the results are investigated but none proves satisfactory aside from documenting significant day of the week effects the implications of the results for tests of market efficiency are examined while market adjusted returns continue to exhibit day of the week effects these effects are no longer concentrated on monday during the last year we have had many conversations with our colleagues throughout the professions we are particularly thankful to the participants at sessions of the western and american finance associations where preliminary versions of this paper were presented special thanks are due to gene fama gailen hite jon ingersoll robert jarrow merton miller clifford smith and rex thompson the expert research assistance of frank rabinovitch and youngsup yun is gratefully acknowledged 1 the list of papers using daily stock returns is too long to name recent examples include charest 1978 dodd 1980 banz 1981 and reinganum 1981

weather and intraday patterns in stock returns and trading activity abstract we examine the relation between weather in new york city and intraday returns and trading patterns of nyse stocks while stock returns are found to be generally lower on cloudier days cloud cover has a significant influence on stock returns only at the market open there are significantly more seller initiated trades when there is more cloud cover at the market open which is consistent with the return results cloudy skies are associated with higher volatility and less market depth over the entire trading day finally cloud cover is not significantly correlated with spread measures and turnover ratios the findings overall suggest that weather has a significant influence on investors intraday trading behavior

informed arbitrage with speculative noise trading abstract we consider speculative noise trading when some naive speculators trade on noise as if it were information black f 1986 noise journal of finance 41 529 543 we examine the optimal trading strategy of an informed investor who faces such naive speculators in the market we find that the informed investor trades aggressively on her information and takes large opposite positions against the naive speculators the trading volume is thereby drastically magnified while such speculative noise trading enhances liquidity it makes prices less efficient the overall dynamic patterns that emerge from our model are most consistent with the evidence for interday variations in volume volatility and transaction costs

another day another collar an evaluation of the effects of nyse rule 80a on trading costs and intermarket arbitrage in 1990 the new york stock exchange amended its rule 80a to restrict stock index arbitrage on days of large price movements the authors find that rule 80a significantly curtails or collars index arbitrage activity in spite of this curtailment in index arbitrage volume they find that rule 80a appears to have had little overall impact on trading costs and intermarket linkage although pricing discrepancies between the markets do appear to be eliminated less quickly the authors results are consistent with the hypothesis that information is conveyed from one market to the other by means other than formal arbitrage copyright 1998 by university of chicago press

trading halts and market activity an analysis of volume at the open and the close this paper analyzes how the daily opening and closing of financial markets affect trading volume we model the desire to trade at the beginning and end of the day as a function of overnight return volatility nyse data from 1933 88 indicate that closing volume is positively related to expected overnight volatility while volume at the open is positively related to both expected and unexpected volatility from the previous night we interpret the symmetric response of trading at the open and the close to expected volatility as being due to investor heterogeneities in the ability to bear risk when the market is closed this desire of investors to trade prior to market closings indicates a cost of mandating marketwide circuit breakers

round the clock market efficiency and home bias evidence from the international japanese government bonds futures markets abstract this paper examines how information is processed between almost identical international futures markets london liffe and tokyo tse jgb futures in these markets variations in open to open changes are virtually the same as those of close to close changes suggesting that information is transmitted efficiently across markets with small opening pricing errors the overall results confirm market efficiency around the clock yet the intraday u shaped patterns in volume volatility of the london jgb futures suggest home bias in international investments indicating a less global view of trading than expected specifically at the liffe open london investors rush to rebalance portfolios instead of doing so at the tse close which is only one hour before the liffe opens

an intraday examination of the federal funds market implications for the theories of the reverse j pattern the intraday literature suggests that returns variances and volume form an intraday reverse j pattern two competing theories explain the observed patterns private information about future security prices and trading stoppages the federal funds market allows a unique opportunity to study the causes of intraday patterns because private information common to most markets does not play a role in setting prices we find reverse j variance patterns while accounting for generalized autoregressive conditional heteroskedasticity garch model effects our results support trading stops as an explanation for the reverse j pattern and suggest that private information is not a necessary condition for the observed pattern

an empirical examination of information differences of opinion and trading activity abstract we investigate the relations between trading volumes and our proxies for information flows and divergences in opinions we view s p 500 index futures open interest as a useful proxy for divergences of traders opinions and find that volumes are higher on days when open interest increases than on days with declines volume in individual equities is more closely related to firm specific information flows while equity basket volume is more closely associated with market information this differential impact is greatest for small capitalization stocks where market wide news has no explanatory power

trading volume and cross autocorrelations in stock returns this paper finds that trading volume is a significant determinant of the lead lag patterns observed in stock returns daily and weekly returns on high volume portfolios lead returns on low volume portfolios controlling for firm size nonsynchronous trading or low volume portfolio autocorrelations cannot explain these findings these patterns arise because returns on low volume portfolios respond more slowly to information in market returns the speed of adjustment of individual stocks confirms these findings overall the results indicate that differential speed of adjustment to information is a significant source of the cross autocorrelation patterns in short horizon stock returns both academics and practitioners have long been interested in the role played by trading volume in predicting future stock returns 1 in this paper we examine the interaction between trading volume and the predictability of short horizon stock returns specifically that due to lead lag cross autocorrelations in stock returns our investigation indicates that trading volume is a significant determinant of the cross autocorrelation patterns in stock returns 2 we find that daily or weekly returns of stocks with high trading volume lead daily or weekly returns of stocks with low trading volume additional tests indicate that this effect is related to the tendency of high volume stocks to respond rapidly and low volume stocks to respond slowly to marketwide information

a direct test of the mixture of distributions hypothesis measuring the daily flow of information this paper proposes and conducts direct tests of the mixture of distributions model for stock prices by exploiting the model s bivariate conditional normality of price changes and trading volume these restrictions can be tested under very weak assumptions regarding the daily flow of information to the market as a technical by product important parameters governing the distribution of this unobservable information flow are estimated

behaviour of intra daily stock return on an asian emerging market hong kong this study examines the intra daily return behaviour of one of the most open asian emerging markets hong kong it is found that there is a general increase in the positive skewness and kurtosis of all the intra daily returns after the 1987 october crash and the distributions of all the returns have become non normal after the crash there seems to be more day of the week and time of the day variations in the post crash period than in the pre crash period there also exists some day end effect in both of the periods and such a day end effect seems to be related to the day of the week

public information arrival we develop a measure of public information flow to financial markets and use it to document the patterns of information arrival with an emphasis on the intraday flows the measure is the number of news releases by reuter s news service per unit of time we find that public information arrival is nonconstant displaying seasonalities and distinct intraday patterns next we relate our measure of public information to aggregate measures of intraday market activity our results suggest a positive moderate relationship between public information and trading volume but an insignificant relationship with price volatility

giving to the poor targeting of food aid in rural ethiopia abstract this study determines the factors underlying the allocations of food aid in ethiopia we focus on regional differences in targeting criteria and targeting accuracy according to per capita income data are drawn from two linked rural household surveys in 1995 96 we find large differences in food aid allocations across regions that cannot be explained by observable regional characteristics such as per capita income and rainfall these differences are consistent with speculation that food aid is being used by the ethiopian government to transfer resources to favored regions we also find wide variations in the criteria used to identify recipient households across regions we identify measurable indicators that could be used by food aid authorities to improve targeting effectiveness in the future both across and within regions finally we present simulation results on targeting accuracy under various targeting strategies and discuss potential benefits and shortcomings of those strategies

trading volume definitions data analysis and implications of portfolio theory we examine the implications of portfolio theory for the cross sectional behavior of equity trading volume two fund separation theorems suggest a natural definition for trading activity share turnover if two fund separation holds share turnover must be identical for all securities if k 1 fund separation holds we show that turnover satisfies an approximately linear k factor structure these implications are examined empirically using individual weekly turnover data for nyse and amex securities from 1962 to 1996 we find strong evidence against two fund separation and a principal components decomposition suggests that turnover is well approximated by a two factor linear model if price and quantity are the fundamental building blocks of any theory of market interactions the importance of trading volume in modeling asset markets is clear although most models of asset markets have focused on the behavior of returns predictability variability and information content their implications for trading volume have received far less attention in this article we derive the implications of various asset market models for volume and quantify their importance using recently available volume data for individual securities from the center for research in security prices crsp although the volume literature is voluminous 1 we hope to add to this literature in two ways first we develop the volume implications of popular asset market models rather than construct more specialized and often stylized models to

stress testing the equity home bias a turnover analysis of eurozone markets abstract shifts in equity turnover happen on and around holidays because rationally bounded investors become distracted their pattern reveals a persistent equity home bias even in the eurozone a stress test case for the survival of this bias given the high level of economic and financial development and integration in this area the bias is greater for small caps because investors are reluctant to hold this class of foreign asset our study corroborates calendar anomalies in trading volumes but refutes the hypothesis regarding turnover sensitivity to stock returns common in the empirical and theoretical literature based on investor heterogeneity and short sale constraints our results reveal vanishing cost asymmetries in taking long rather than short positions

the impact of public information on the stock market we study the relation between the number of news announcements reported daily by dow jones company and aggregate measures of securities market activity including trading volume and market returns we find that the number of dow jones announcements and market activity are directly related and that the results are robust to the addition of factors previously found to influence financial markets such as day of the week dummy variables news importance as proxied by large new york times headlines and major macroeconomic announcements and non information sources of market activity as measured by dividend capture and triple witching trading however the observed relation between news and market activity is not particularly strong and the patterns in news announcements do not explain the day of the week seasonalities in market activity our analysis of the dow jones database confirms the difficulty of linking volume and volatility to observed measures of information

do college preparatory programs improve long term outcomes this paper presents an analysis of the longer run effects of a college preparatory program implemented in inner city schools that provided teacher training in addition to payments to 11th and 12th grade students and their teachers for passing scores on advanced placement ap exams affected students passed more ap exams were more likely to remain in college beyond their first and second years and earned higher wages effects are particularly pronounced for hispanic students who experienced a 2 5 percentage point increase in college degree attainment and an 11 increase in earnings while the study is based on nonexperimental variation the results are robust across a variety of specifications and most plausible sources of bias are ruled out the results provide credible evidence that implementing high quality college preparatory programs in existing urban schools can improve the long run educational and labor market outcomes of disadvantaged youth jel i2 i24 j0

trading mechanisms and price volatility spot versus futures this paper compares the volatility of spot prices with that of futures prices using two estimators of volatility natural and temporal using intraday data of the major market index and its futures prices the author shows that the well known u shaped volatility patterns during the day are not necessarily due to trading mechanisms the author also shows that when a temporal estimator is substituted for a natural estimator th e u shaped patterns disappear in both the spot and futures markets th e author provides some reasons why a temporal estimator may add more information copyright 1993 by mit press

intraweek and intraday seasonalities in stock market risk premia cash and futures abstract the unique nature of the settlement procedures on the london stock exchange are utilised to directly investigate intraweek and intraday seasonalities in ex post risk premia rather than total returns and compare them with the corresponding intraweek and intraday seasonalities in the index futures market seasonalities in the occurrence of extreme price changes are also examined the results reported are based on about 4 years of hourly cash and futures data the analysis is conducted using both parametric and non parametric methods the observed empirical regularities have implications for explanations of seasonality based on market microstructure timing of news and psychological behavioural patterns it is also found that the stock market has not efficiently accounted for the interest costs inherent in its own settlement procedures

new findings regarding day of the week returns over trading and non trading periods a note this paper decomposes daily close to close returns into trading day and non trading day returns we discover that all of the average negative returns from friday close to monday close documented in the literature for stock market indexes occurs during the non trading period from friday close to monday open in addition average trading day returns open to close are identical for all days of the week january firm size turn of the year anomalies are shown to be interrelated with day of the week returns

u k and u s trading of british cross listed stocks an intraday analysis of market integration this article analyzes intraday patterns for u k and u s trading of british cross listed stocks for each market the intraday patterns for these stocks closely resemble those of otherwise similar non cross listed stocks there is a 2 hour period each day when cross listed stocks are traded both in new york and in london this overlap is characterized by concentrated trading as private information originating in new york gets incorporated into prices in both markets cross border competition for order flow tends to reduce already declining spreads in london by contrast new york specialists maintain high spreads during the overlap overall the evidence indicates that order flow for cross listed securities is segmented article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

interday variations in volume variance and participation of large speculators abstract we use data uniquely available from the commodity futures trading commission cftc to document the intraweek trading patterns of large speculators in five futures markets these markets include futures traded against the standard and poor s 500 stock index treasury bonds gold corn and soybeans we also examine the influence of large speculator trades on the patterns of volume and volatility for the contracts in our sample though we detect the familiar u shaped and inverted u shaped patterns across weekdays for volatility and aggregate volume the association between volume and volatility becomes stronger when we separate large speculator volume from volume associated with other traders the coefficient on large speculator volume is much larger than the coefficient on other volume in these regressions compared with total volume large speculator volume is greater on mondays than on the other days of the week in all five markets

generalized beta distributions for describing and analysing intraday stock market data testing the u shape pattern there is an impressive body of empirical evidence which indicates the existence of an intraday u shaped curve in stock prices in an effort to shed additional light on the u shaped curve a new procedure for u shape testing is introduced from careful analysis of intraday data it is observed that minimum or maximum stock prices can occur several times during the day here attention is focused on the first time during the day that the maximum or minimum stock price occurred because of the importance of the first time during the day that the maximum or minimum stock price occurred an attempt is made to model these two characteristics with probability distributions the objective of this study is to use a generalized beta distribution to examine the intradaily behaviour of stocks using closing stock prices for each one minute interval using data from athens stock exchange ase this generalized beta distribution has not been used before to model u shaped behaviour the results are consistent with the in

an investigation of transactions data for nyse stocks using transactions data the behavior of returns and characteristics of trades at the micro level is examined a minute by minute market return series is formed and tested for normality and autocorrelation evidence of differences in return distributions is found among overnight trades trades during the first 30 minutes following the market opening trades at the close and trades during the remainder of the day the latter distribution is found to be normal unusually high returns and standard deviations of returns are found at the beginning and the end of the trading day when the beginningand end of the day effects are omitted autocorrelation in the market return series is reduced substantially a number of patterns in trading are reported this paper empirically investigates the nature of the return generating process and the characteristics of trade size price changes trading frequency and trading interval at the level of individual trades for a large sample of nyse stocks previous studies of market indices have used daily weekly or monthly

is information assimilated at announcements in the european carbon market abstract we examine the high frequency new information impact on prices volatility trading volume and illiquidity at scheduled macroeconomic and verified emissions announcements for the european carbon futures market verified emissions united states non farm payroll and german new factory order macroeconomic announcements impact carbon prices swiftly within 5 min we show that a one standard deviation surprise increase in verified emission announcements is associated with an approximate ten percentage point 9 96 increase in carbon futures returns a wait and see stylized trading behavior is evident at announcements in volatility and trading volumes market illiquidity increases at announcements in relation to united states non farm payroll albeit there is no evidence of an increase in illiquidity prior to announcements the development of new information impact over time occurs mainly in the at announcement 5 minute time interval

on intraday risk premia this article presents a framework for analyzing the dynamic effects of anticipated large demand pressures on asset risk premia we show that large institutions who can time their entry into the market will trade either at the open or during periods of unusual demand pressures we show that if these institutions do enter later in the day they trade in the same direction as institutions which provide liquidity continuously institutions therefore appear to exhibit herding behavior we also explore how changing the uncertainty of demand pressures late in the day affects trading costs throughout the day most financial market investors do not continuously monitor intraday fluctuations in stock prices other activities e g outside employment often take precedence over following the stock market and there are limitations to processing information for example a reader of this page is likely to be unaware of current financial market prices in fact for many investors entry into financial markets occurs once a day or even less frequently given these institutional realities it is of interest to explore how asset markets react when it is known that a set of very large predictable demands will arrive during the afternoon does their arrival affect prices only when they arrive or throughout the day if the price impact is spread out then how do trading costs behave during the day if some traders have the flexibility to time their entry into the market when will they arrive during the day and how will their entry decisions affect asset risk premia if market participants anticipate that demands in the afternoon will be unusually volatile how does this affect the intertemporal behavior of prices and expected returns earlier in the day the primary focus of this article is the development of tractable methodologies that can address these issues

trading and liquidity on the tokyo stock exchange a bird s eye view the trading mechanism for equities on the tokyo stock exchange tse stands in sharp contrast to the primary mechanisms used to trade stocks in the united states in the united states exchange designated specialists have affirmative obligations to provide continuous liquidity to the market specialists offer simultaneous and tight quotes to both buy and sell and supply sufficient liquidity to limit the magnitude of price changes between consecutive transactions in contradistinction the tse has no exchange designated liquidity suppliers instead liquidity is provided through a public limit order book and liquidity is organized through restrictions on maximum price changes between trades that serve to slow down trading in this article we examine the efficacy of the tse s trading mechanisms at providing liquidity our analysis is based on a complete record of transactions and best bid and best offer quotes for most stocks in the first section of the tse over a period of 26 months we study the size of the bid ask spread and its cross sectional and intertemporal stability intertemporal patterns in returns volatility volume trade size and the frequency of trades and market depth based on the response of quotes to trades and the frequency of trading halts and warning quotes the trading mechanism for equities on the tokyo stock exchange tse stands in sharp contrast to the primary mechanisms used to trade stocks in the united states in the united states exchange designated specialists have affirmative obligations to provide continuous liquidity in the market and to maintain a private limit order book with the public s limit orders on the tse exchange designated intermediaries saitori log limit orders and match them to incoming market orders but provide no market making services in the united states specialists offer simultaneous and tight quotes to both buy and sell on the tse public limit orders constitute the available bids and offers in the united states specialists supply sufficient liquidity to limit the magnitude of price changes between consecutive transactions 1 on the tse the market mechanism places limits on the magnitude of consecutive price

individual teacher incentives and student performance this paper is the first to systematically document the relationship between individual teacher performance incentives and student achievement using the united states data we combine data from the national education longitudinal survey on schools students and their families with our own survey conducted in 2000 regarding the use of teacher incentives this survey on teacher incentives has unique data on frequency and magnitude of merit raises and bonuses teacher evaluation and teacher termination we find that test scores are higher in schools that offer individual financial incentives for good performance moreover the estimated relationship between the presence of merit pay in teacher compensation and student test scores is strongest in schools that may have the least parental oversight the association between teacher incentives and student performance could be due to better schools adopting teacher incentives or to teacher incentives eliciting more effort from teachers it is impossible to rule out the former explanation with our cross sectional data

targeting of food aid in rural ethiopia chronic need or inertia abstract this paper quantifies the factors underlying the allocations of food aid by the ethiopian government together with local and international non governmental organizations ngos both across rural regions and to households within regions we focus on reduced form specifications in which as little structure as possible is put on the decision rules because so little is known about these rules and their implementation nationally representative rural household data from ethiopia collected in 1996 are used the paper determines the extent to which food aid both free distribution and food for work is targeted to poor households and communities we also demonstrate that food aid allocations display a large degree of spatial continuity over time and are concentrated in areas that at least during the time of the survey are not the poorest the paper attempts to disentangle two competing explanations for the apparent spatial rigidity of food aid allocations that the recipient areas are chronically needy or that needs shift geographically from 1 year to the next but that fixed costs in setting up operations and in the process of identifying needs lead to a degree of inertia in the location of food aid programs over time we conclude that the evidence best fits the inertia explanation

performance pay and teachers effort productivity and grading ethics this paper presents evidence about the effect of individual monetary incentives on english and math teachers in israel teachers were rewarded with cash bonuses for improving their students performance in high school matriculation exams the main identification strategy is based on measurement error in the assignment to treatment variable that produced a randomized treatment sample the incentives led to significant improvements in test taking rates conditional pass rates and mean test scores improvements were mediated through changes in teaching methods enhanced after school teaching and increased responsiveness to students needs no evidence was found of manipulation of test scores by teachers

testing for linear and nonlinear granger causality in the stock price volume relation linear and nonlinear granger causality tests are used to examine the dynamic relation between daily dow jones stock returns and percentage changes in new york stock exchange trading volume we find evidence of significant bidirectional nonlinear causality between returns and volume we also examine whether the nonlinear causality from volume to returns can be explained by volume serving as a proxy for information flow in the stochastic process generating stock return variance as suggested by clark s 1973 latent common factor model after controlling for volatility persistence in returns we continue to find evidence of nonlinear causality from volume to returns

the dependence between hourly prices and trading volume this study provides evidence on joint characteristics of hourly common stock trading vol ume and returns on the new york stock exchange average volume traded shows signifi cant differences across trading hours of the day and across days of the week average returns differ across hours ofthe day and to some extent across days ofthe week there is a strong contemporaneous relation between trading volume and returns and also a rela tion between trading volume and returns lagged up to four hours furthermore the trading volume returns relation is steeper for positive returns than for nonpositive returns

tax induced trading around ex dividend days abstract this paper investigates trading volume around ex dividend days for taxable distributions cash dividends it is found that trading volume increases significantly around the ex dividend day this increase is more pronounced for high yield actively traded stocks and after brokerage commissions became negotiable the results are consistent with the hypothesis that short term traders have an impact on ex day price behavior at least for taxable distributions for non taxable distributions stock splits and stock dividends we find negative abnormal volume around ex day

intraday relationships among index arbitrage spot and futures price volatility and spot market volume a transactions data test abstract this paper examines intraday temporal relationships among arbitrage spreads cash and futures price volatility and cash trading volume using transactions data for the major market index futures contracts and the component stocks of the index results indicate that changes in the spread have a significant impact on cash and futures price volatility as well as on cash trading volume the impact of the spread however is attenuated by the short sale restriction in the cash market contrary to popular beliefs a more volatile market leads to subsequent decreases in the spread probably because of increases in the supply of arbitrage services or faster price adjustments

the individual investor and the weekend effect it is well known that stock returns on average are negative on mondays yet it is less well known that this finding is substantially the consequence of returns in prior trading sessions when friday s return is negative monday s return is negative nearly 80 percent of the time with a mean return of 0 61 percent when friday s return is positive the subsequent monday s mean return is positive 0 11 percent this relationship is stronger than for any other pair of trading days and is most acute in small and medium size companies the trading behavior of individual investors appears to be at least one factor contributing to this pattern individual investors are more active sellers of stock on mondays particularly following bad news in the market

information trading and stock returns lessons from dually listed securities this paper compares the intra day patterns on the nyse and amex of volatility trading volume and bid ask spreads for european and japanese dually listed stocks with american stocks of comparable average trading volume and volatility it is shown that the intra day patterns for these stocks are remarkably similar even though public information flows differ markedly across these stocks during the trading day in the early morning all stocks have higher volatility than later in the day but this phenomenon is most pronounced for japanese stocks and affects american stocks the least we argue that these patterns are consistent with markets reacting to the overnight accumulation of public information but are inconsistent with the view that early morning volatility can be attributed to monopolistic specialist behavior

the intraday speed of stock price adjustment to major dividend changes bid ask bounce and order flow imbalances abstract this paper examines the intraday stock price reaction to substantial shifts in dividend policy the results indicate the price reaction to be slower than that previously found by patell and wolfson 1984 and closer to that found with earnings announcements by woodruff and senchack 1988 possible order flow imbalances are examined by looking at the proximity of transaction prices to contemporaneous bid and ask quotes while order flow imbalances are evident for bad news announcements this is not the case for the dividend increase sample this is interpreted as evidence that the price reaction to major dividend increases are in general anticipated fifteen minute holding period returns are computed to measure the movement of equilibrium prices during the announcement period results show a rapid adjustment of prices to positive announcements with adjustment to negative announcements taking up to 75 minutes finally fifteen minute lagged bid ask returns are calculated to determine whether an investor could respond to the announcement and earn positive returns these results are found to be dependent on the transaction cost assumptions being made

the relation between price changes and trading volume a survey this paper reviews previous and current research on the relation between price changes and trading volume in financial markets and makes four contributions first two empiri cal relations are established volume is positively related to the magnitude of the price change and in equity markets to the price change per se second previous theoretical research on the price volume relation is summarized and critiqued and major insights are emphasized third a simple model ofthe price volume relation is proposed that is consis tent with several seemingly unrelated or contradictory observations and fourth several directions for future research are identified

an empirical analysis of the stock price volume relationship abstract this paper investigates the empirical relationship between absolute stock price changes and trading volume in the stock market using granger causality tests we find that there is a significant causal relationship between absolute price changes and volume at the firm level and that this relationship is stronger in periods surrounding earnings announcements we view this as suggesting that information arrival follows a sequential rather than a simultaneous process although the results do not support an extreme version of either information arrival model

trading breaks and asymmetric information the option markets abstract we find that weekend holiday and overnight trading breaks generate excessive perceived risk in the option markets presumably due to asymmetric information which in turn encourages uninformed option traders to postpone trading this perceived risk subsides after two days accompanied by an increase in the option trading volume and the underlying index s actual price volatility these results shed light on the informational role of index options and suggest that the theoretical models results regarding information processing and price discovery in the presence of private information are not limited to single stocks but also apply to the market as a whole

futures trading activity and stock price volatility we examine whether greater futures trading activity volume and open interest is associated with greater equity volatility we partition each trading activity series into expected and unexpected components and document that while equity volatility covaries positively with unexpected futures trading volume it is negatively related to forecastable futures trading activity further though futures trading activity is systematically related to the futures contract life cycle we find no evidence of a relation between the futures life cycle and spot equity volatility these findings are consistent with theories predicting that active futures markets enhance the liquidity and depth of the equity markets

rolling settlement and market liquidity this paper investigates the impact on uk stock and option markets of the change from an account based settlement system to a rolling settlement procedure such a change increases the transaction costs of short term margin traders and is likely to impact on the liquidity of the underlying market as well as trading in the options market evidence is presented that the settlement procedure does impact on the liquidity of the market further we find that rolling settlement increased market liquidity consistent with the exit of margin traders as a result of the increase in short selling costs associated with this increase in liquidity is a significant reduction in nonoptionable stock trading volume implying that margin trading may have been more prevalent in stocks without options finally it is shown that while trading in stock options increased the volatilities implied from call and put option prices indicate that put options have become relatively more expensive this reflects the change in demand i

distilling liquidity costs from limit order books abstract this paper proposes a method to compute ex ante trading costs at the intraday level from limit order books using nearly 500 of the largest traded companies in the nyse arcabook we show that these costs have nontrivial intraday dynamics are negatively related to volume and positively related to volatility when ex ante trading costs are incorporated into price impact specifications the results show that this measure provides relevant information about price changes of the market at a high frequency level our evidence suggest that ex ante trading costs constitute a new source of information for the study of intraday liquidity

infrequent rebalancing return autocorrelation and seasonality a model of infrequent rebalancing can explain specific predictability patterns in the time series and cross section of stock returns first infrequent rebalancing produces return autocorrelations that are consistent with empirical evidence from intraday returns and new evidence from daily returns autocorrelations can switch sign and become positive at the rebalancing horizon second the cross sectional variance in expected returns is larger when more traders rebalance this effect generates seasonality in the cross section of stock returns which can help explain available empirical evidence

food aid targeting in ethiopia a study of who needs it and who gets it abstract the need for systematic empirical analysis of food aid targeting and impacts is overwhelming especially given the large numbers of people concerned and volume of funds allocated to the problem of feeding ethiopia s food insecure this research examines the efficiency of food aid targeting in rural ethiopia based on empirical evidence from a nationally representative survey of 4166 farm households a key finding of the study is that there is no significant association between household food insecurity vulnerability and food aid receipts a result of high errors of exclusion and inclusion at both the wereda and household levels four factors are identified as causes of the high level of targeting error 1 the primary beneficiaries of food aid programs are found to be households at the extremes in terms of food availability those with the least and those with the most food available 2 a disproportionate number of female and aged heads of households received food aid irrespective of their food needs 3 an inability of the food aid system to reach households outside of the historically deficit areas and 4 a disproportionate concentration of food aid in the region of tigray

accountability and flexibility in public schools evidence from boston s charters and pilots charter schools are publicly funded but operate outside the regulatory framework and collective bargaining agreements characteristic of traditional public schools in return for this freedom charter schools are subject to heightened accountability this paper estimates the impact of charter school attendance on student achievement using data from boston where charter schools enroll a growing share of students we also evaluate an alternative to the charter model boston s pilot schools these schools have some of the independence of charter schools but operate within the school district face little risk of closure and are covered by many of same collective bargaining provisions as traditional public schools estimates using student assignment lotteries show large and significant test score gains for charter lottery winners in middle and high school in contrast lottery based estimates for pilot schools are small and mostly insignificant the large positive lottery based estimates for charter schools are similar to estimates constructed using statistical controls in the same sample but larger than those using statistical controls in a wider sample of schools the latter are still substantial however the estimates for pilot schools are smaller and more variable than those for charters with some significant negative effects

an analysis of transactions data for the toronto stock exchange abstract using transactions data for all stocks traded on the toronto stock exchange this study shows that returns and number of shares traded have a u shaped pattern when plotted against time of the trading day these results confirm that the findings of wood mclnish and ord 1985 harris 1986 mclnish and wood 1988 and jain and joh 1989 for the new york stock exchange nyse also hold for both another exchange and another country and are not due to peculiarities of united states securities markets further evidence is provided to support the view of harris 1989 and terry 1986 that these relatively high end of day returns are due at least in part to an increase in the proportion of trades at the ask relative to trades at the bid

community targeting for poverty reduction in burkina faso this article develops a method for targeting antipoverty programs and public projects to poor communities in rural and urban areas the method calls for constructing an extensive data set from a large number of sources and then integrating the entire set into a geographic information system the data set includes demographic data from the population census household level data from a variety of surveys community level data on local road infrastructure public facilities water points and so on and department level data on agro climatic conditions an econometric model that estimates the impact of household community and department level variables on household consumption is used to identify the key explanatory variables that determine the standard of living in rural and urban areas this model is then applied to predict poverty indicators for 3 871 rural and urban communities in burkina faso and to map the spatial distribution of poverty in the country a simulation analysis assesses the effectiveness of village level targeting based on these predictions the results show that such targeting is an improvement over regional targeting in that it reduces leakage and under coverage

the dynamic relationship between stock returns and trading volume domestic and cross country evidence abstract this paper examines the dynamic relations causal relations and the sign and magnitude of dynamic effects between stock market trading volume and returns and volatility for both domestic and cross country markets by using the daily data of the three largest stock markets new york tokyo and london major findings are as follows first trading volume does not granger cause stock market returns on each of three stock markets second there exists a positive feedback relationship between trading volume and return volatility in all three markets third regarding the cross country relationships us financial market variables in particular us trading volume contains an extensive predictive power for uk and japanese financial market variables fourth sub sample analyses show evidence of stronger spillover effects after the 1987 market crash and an increased importance of trading volume as an information variable after the introduction of options in the us and japan

flexible exchange rates a closer look abstract the stochastic properties of flexible exchange rates are investigated by looking at a sample of intradaily sfr quotes for 231 trading days in 1983 estimated moments of the distribution of returns over five minute intervals often exhibit large changes which are mostly unpredictable even from one day to the next autocorrelation in returns is generally absent even inside a given day specific days of the week do not exhibit any special characteristics during a single day both relative changes in exchange rates as well as their volatility show some distinct patterns

volume volatility and public news announcements we provide new empirical evidence for the way in which financial markets process information our results rely critically on high frequency intraday price and volume data for the s p 500 equity portfolio and u s treasury bonds along with new econometric techniques for making inference on the relationship between trading intensity and spot volatility around public news announcements consistent with the predictions derived from a theoretical model in which investors agree to disagree our estimates for the intraday volume volatility elasticity around important news announcements are systematically below unity our elasticity estimates also decrease significantly with measures of disagreements in beliefs economic uncertainty and textual based sentiment further highlighting the key role played by differences of opinion

trading and returns under periodic market closures this paper studies how market closures affect investors trading policies and the resulting return generating process it shows that closures generate rich patterns of time variation in trading and returns including those consistent with empirical findings 1 u shaped patterns in the mean and volatility of returns over trading periods 2 higher trading activity around the close and open 3 more volatile open to open returns than close to close returns 4 higher returns over trading periods than over nontrading periods 5 more volatile returns over trading periods than over nontrading periods it also shows that closures can make prices more informative about future payoffs we model a competitive stock market with periodic closures in which investors trade for both allocational and informational reasons we use the model to study how market closures intrinsically affect investors trading behavior and the return generating process the purpose of this analysis is to increase our understanding of the time variation in security trading and returns that are associated with regular market closures such as the intraday and intraweek patterns in stock returns volatility and trading volume we consider a stock market in which the exogenous information flow is homogeneous over time and the market closes periodically when the market is open investors trade the stock either to rebalance their overall portfolio of assets which also includes other illiquid assets or to speculate on future stock payoffs using their private information in particular investors adjust their asset portfolio by trading the stock in order to hedge the risk of illiquid assets we refer to these trades as hedging trades and those motivated by private information as speculative trades when the market is closed hong is from the graduate school of business stanford university and wang is from the sloan school of management massachusetts institute of technology and nber the authors thank jennifer huang for programming assistance and an anonymous referee for many valuable suggestions they also thank glenn ellison john heaton craig holden andrew lo steve slezak jeremy stein rene stulz the editor the nber asset pricing lunch group and par

a transaction data study of weekly and intradaily patterns in stock returns abstract weekly and intradaily patterns in common stock prices are examined using transaction data for large firms negative monday close to close returns accrue between the friday close and the monday open for smaller firms they accrue primarily during the monday trading day for all firms significant weekday differences in intraday returns accrue during the first 45 minutes after the market opens on monday mornings prices drop while on the other weekday mornings they rise otherwise the pattern of intraday returns is similar on all weekdays most notable is an increase in prices on the last trade of the day

adverse selection costs trading activity and price discovery in the nyse an empirical analysis this paper studies the role that trading activity plays in the price discovery process of a nyse listed stock we measure the expected information content of each trade by estimating its permanent price impact it depends on observable trade features and market conditions we also estimate the time required for quotes to incorporate all the information content of a particular trade our results show that price discovery is faster after risky trades and also at the extreme intervals of the session the quote adjustment to trade related shocks is progressive and this causes risk persistency and unusual short term market conditions

poverty in egypt modeling and policy simulations abstract poverty profiles are a useful way of summarizing information on the levels of poverty and the characteristics of the poor in a society but they are limited by the bivariate nature of their informational content using the 1997 egypt integrated household survey eihs this article estimates models of household consumption in the first stage and then predicts poverty rates corresponding to changes in potential policy variables the key results of the study point to the important instrumental role of education parental background land redistribution and access to health facilities in alleviating poverty in egypt

price formation on stock exchanges the evolution of trading within the day prior analyses of prices of the nyse and other exchanges find that transitory price volatility is greater at the open of trading than at the close we extend this line of research by using 40 years of hourly dow jones 65 composite price index data to estimate transitory volatility throughout the trading day our results indicate that transitory volatility steadily declines during the trading day we find a similar intraday decline in transitory volatility for a 2 1 2 year sample of the individual firms in the dow jones 30 industrials index the results are consistent with the hypothesis that trading aids price formation and do not support the argument that particular trading mechanisms are the source of greater volatility at the open of trading article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

autocorrelation of daily index returns intraday to intraday versus close to close intervals abstract first order autocorrelation coefficients of 1 daily equally weighted open to open returns 2 daily equally weighted intraday to intraday returns terminating at each of 23 successive 15 minute intervals of the trading day beginning at 10 15 a m and 3 daily equally weighted and value weighted close to close returns interval 24 are examined a number of findings concerning the behavior of these autocorrelations are reported first order autocorrelation is shown to follow a crude u shaped pattern when plotted against the time of the trading day but there is no significant difference in the behavior of autocorrelations based on open to open returns and 24 hour returns terminating at 10 15 a m evidence that intraday patterns in autocorrelation cannot be explained fully by trading delays also is presented

futures price variability a test of maturity and volume effects a number of previous studies have examined the contemporaneous relation between asset price variability and volume traded for example clark 1973 cornell 1981 and tauchen and pitts 1983 have investigated this relation for futures markets and epps and epps 1976 harris 1984a 1984b and smirlock and starks 1984 for the stock market underlying this empirical research is a theoretical framework that suggests that price variability or the absolute change in prices and volume traded should be positively correlated according to this theoretical framework the so called mixture of distributions hypothesis mdh 1 the correlation between price variability and volume should be positive because of joint dependence on a common directing variable or event this study uses contract disaggregated data on futures prices to obtain evidence on the relation between price variability and volume of trading strong positive contemporaneous correlations between trading volume and price volatility are documented consistent with the mixture of distributions hypothesis it is concluded that maturity is not a suitable surrogate for the common directing variable specifically while maturity has a strong effect on volume no such relation is found for price variability finally while in the majority of cases price variability and trading volume are contemporaneously correlated there are a significant number of cases in which a sequential relation appears to be present an earlier version of this paper was presented at the 1984 meeting of the european finance association in manchester england and at southern methodist university the university of wisconsin madison duke university mcgill university and the university of toronto we wish to thank the seminar participants and an anonymous referee from this journal for constructive comments and criticism all remaining errors are of course our responsibility we would also like to thank the columbia center for the study of futures markets and the interactive data corp for providing some of the data used in the study 1 see clark 1973 and harris 1984a 1984b

the price variability volume relationship on speculative markets this paper concerns the relationship between the variability of the daily price change and the daily volume of trading on the speculative markets our work extends the theory of speculative markets in two ways first we derive from economic theory the joint probability distribution of the price change and the trading volume over any interval of time within the trading day and second we determine how this joint distribution changes as more traders enter or exit from the market the model s parameters are estimated by fiml using daily data from the 90 day t bills futures market the results of the estimation can reconcile a conflict between the price variability volume relationship for this market and the relationship obtained by previous investigators for other speculative markets this paper concerns the relationship between the variability of the daily price change and the volume of trading on speculative markets previous empirical studies 2 3 6 12 14 16 of both futures and equity markets always find a positive association between price variability as measured by the squared price change ap2 and the trading volume 2 there are two explanations for the relationship clark s 2 explanation which is secondary to his effort to explain why the probability distribution of the daily price change is leptokurtic emphasizes randomness in the number of within day transactions in clark s model the daily price change is the sum of a random number of within day price changes the variance of the daily price change is thus a random variable with a mean proportional to the mean number of daily transactions clark argues that the trading volume is related positively to the number of within day transactions and so the trading volume is related positively to the variability of the price change the second explanation is due to epps and epps 6 their model examines the mechanics of within day trading the change in the market price on each within day transaction or market clearing is the average of the changes in all of the traders reservation prices epps and epps assume there is a positive relationship between the extent to which traders disagree when they revise their reservation prices and the absolute value of the change in the market price that is an increase in the extent to which traders disagree is associated with a larger absolute price change the price variability volume relationship arises then because the volume of trading is positively related to the extent to which traders disagree when they revise their reservation prices

intra day and inter market volatility in foreign exchange rates four foreign exchange spot rate series recorded on an hourly basis for a six month period in 1986 are examined a seasonal garch model is developed to describe the time dependent volatility apparent in the percentage nominal return of each currency hourly patterns in volatility are found to be remarkably similar across currencies and appear to be related to the opening and closing of the worlds major markets robust lm tests designed to deal with the extreme leptokurtosis in the data fails to uncover any evidence of misspecification or the presence of volatility spillover effects between the currencies or across markets

stable classes of technical trading rules technical analysis includes a huge variety of trading rules this fact has always been a serious hindrance to the large number of market efficiency studies implemented either to demonstrate the profitability of market beating systems or to deny their operational feasibility for evident reasons it is practically impossible and theoretically weak to systematically analyse the entire body of all trading rules we therefore propose a novel method to form natural classes of trading rules which are found to be robust to changing market scenarios in particular groups are formed adopting a similarity measure based on the investing signals of the trading rules our clustering methodology adopts a markov chain bootstrapping technique to generate differentiated scenarios preserving volume and price joint distributional features an application is developed on a sample of 674 trading rules results show that six groups here identified as trading styles are sufficient to explain the large portion of the investing

public information arrival and volatility of intraday stock returns abstract this study employs firm specific announcements as a proxy for information flows and investigates the information volatility relation using high frequency data from the australian stock exchange our analysis reveals a positive and significant impact of the arrival rate of the selected news variable on the conditional variance of stock returns even after controlling for the potential effects of trading volume and high opening volatility furthermore the inclusion of the news variable in the conditional variance equation of the generalized autoregressive conditional heteroscedastic model also reduces volatility persistence especially with intraday data combined with the evidence that news arrivals display a very strong pattern of autocorrelation our results are consistent with the mixture of distribution hypothesis which attributes conditional heteroscedasticity of stock returns to time dependence in the news arrival process