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The Dynamics of Security Trades, Quote Revisions, and Market Depths for Actively Traded Stocks

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  • Shafiqur Rahman
  • Chandrasekhar Krishnamurti
  • Alice Lee

Abstract

We examine the dynamics of return volatility, trading volume, and depth—in an intraday setting for a sample of actively traded NYSE and NASDAQ stocks. We show that depth is a useful intervening variable and mitigates the impact of trading activity on price volatility. Furthermore, depth is affected by the perception of prevailing information asymmetry between informed and uninformed traders. We demonstrate empirically that the NYSE supplies greater depth under conditions of high, perceived information asymmetry as compared to NASDAQ. NASDAQ makes up for this deficiency by its capability of managing large volume shocks without a major decline in depth. Copyright Springer Science + Business Media, Inc. 2005

Suggested Citation

  • Shafiqur Rahman & Chandrasekhar Krishnamurti & Alice Lee, 2005. "The Dynamics of Security Trades, Quote Revisions, and Market Depths for Actively Traded Stocks," Review of Quantitative Finance and Accounting, Springer, vol. 25(2), pages 91-124, September.
    • Handle: RePEc:kap:rqfnac:v:25:y:2005:i:2:p:91-124
    DOI: 10.1007/s11156-005-4244-x
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    Cited by:

    1. Jared F. Egginton & Bonnie F. Ness & Robert A. Ness, 2016. "Dealers and changing obligations: the case of stub quoting," Review of Quantitative Finance and Accounting, Springer, vol. 47(4), pages 919-941, November.
    2. Lawrence Kryzanowski & Skander Lazrak, 2011. "Informed traders of cross-listed shares trade more in the domestic market around earnings releases," Review of Quantitative Finance and Accounting, Springer, vol. 36(1), pages 1-31, January.
    3. Ernest N. Biktimirov & Yuanbin Xu, 2019. "Asymmetric stock price and investor awareness reactions to changes in the Nasdaq 100 index," Journal of Asset Management, Palgrave Macmillan, vol. 20(2), pages 134-145, March.
    4. Raman Kumar & Marius Popescu, 2014. "The implied intra-day probability of informed trading," Review of Quantitative Finance and Accounting, Springer, vol. 42(2), pages 357-371, February.
    5. Yu Cong & Rani Hoitash & Murugappa Krishnan, 2010. "Event study with imperfect competition and private information: earnings announcements revisited," Review of Quantitative Finance and Accounting, Springer, vol. 34(3), pages 383-411, April.
    6. Malay Dey & Hossein Kazemi, 2008. "Bid ask spread in a competitive market with institutions and order size," Review of Quantitative Finance and Accounting, Springer, vol. 30(4), pages 433-453, May.

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