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International stock return co-movements and trading activity

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  • Sheng, Xin
  • Brzeszczyński, Janusz
  • Ibrahim, Boulis M.

Abstract

This paper analyses return co-movements across eight major international stock markets while considering the nature of motives to trade for a given daily price change. Daily volume as an information signal is dissected into quintiles and its interaction with returns is examined. The results show that international return spillover effects are sensitive to different levels of trading activity and price changes driven by liquidity-based and information-based trades can both spill over across borders. We find that trades originating in Asia are information-based, those originating in America are liquidity-based, and those originating in Europe are a mixture of these two types.

Suggested Citation

  • 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.
    • Handle: RePEc:eee:finlet:v:23:y:2017:i:c:p:12-18
    DOI: 10.1016/j.frl.2017.06.006
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    Cited by:

    1. Lucey, Brian M. & Vigne, Samuel A. & Ballester, Laura & Barbopoulos, Leonidas & Brzeszczynski, Janusz & Carchano, Oscar & Dimic, Nebojsa & Fernandez, Viviana & Gogolin, Fabian & González-Urteaga, Ana , 2018. "Future directions in international financial integration research - A crowdsourced perspective," International Review of Financial Analysis, Elsevier, vol. 55(C), pages 35-49.
    2. Lau, Chi Keung Marco & Sheng, Xin, 2018. "Inter- and intra-regional analysis on spillover effects across international stock markets," Research in International Business and Finance, Elsevier, vol. 46(C), pages 420-429.
    3. Nguyen, Canh Phuc & Nguyen, Thai Vu Hong & Schinckus, Christophe, 2019. "Institutions, economic openness and stock return co-movements: An empirical investigation in emerging markets," Finance Research Letters, Elsevier, vol. 28(C), pages 137-147.
    4. Long, Wen & Guo, Ying & Wang, Ying, 2021. "Information spillover features in global financial markets: A systematic analysis," Research in International Business and Finance, Elsevier, vol. 57(C).

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    More about this item

    Keywords

    Return spillovers; Trading volume; Interaction effects; GARCH models;
    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
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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