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Capital market trading volume: an overview and some preliminary conclusions

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  • John Grahl
  • Photis Lysandrou

Abstract

This paper suggests an explanation for the heavy trading volume observed on the US capital markets, the world's largest. Heterodox economic theory puts much of this volume down to speculation. Mainstream theory tends to support this thesis, either directly or indirectly, by giving space to the idea that trading activity is for the most part exogenous to the functioning of the capital markets. The central hypothesis of this paper is that the trading volumes observed are an endogenous feature of the capital markets, because they are to a great extent determined by the needs of the institutional investors who predominate on these markets. This endogeneity of trading is posited in connection with the emergence of a new 'core--satellite' paradigm in institutional investment, a development that essentially manifests the asset-management industry's transformation from a small industry serving a few wealthy clients to a mass industry serving large sections of the population. Copyright 2006, Oxford University Press.

Suggested Citation

  • John Grahl & Photis Lysandrou, 2006. "Capital market trading volume: an overview and some preliminary conclusions," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 30(6), pages 955-979, November.
    • Handle: RePEc:oup:cambje:v:30:y:2006:i:6:p:955-979
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    File URL: http://hdl.handle.net/10.1093/cje/bel014
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    Cited by:

    1. Photis Lysandrou, 2016. "The colonization of the future: An alternative view of financialization and its portents," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 39(4), pages 444-472, October.
    2. Photis Lysandrou, 2014. "Post-Keynesian stock-flow models after the subprime crisis: the need for micro-foundations," European Journal of Economics and Economic Policies: Intervention, Edward Elgar Publishing, vol. 11(1), pages 113-126, April.
    3. Annina Kaltenbrunner & Photis Lysandrou, 2017. "The US Dollar's Continuing Hegemony as an International Currency: A Double-matrix Analysis," Development and Change, International Institute of Social Studies, vol. 48(4), pages 663-691, July.
    4. Photis Lysandrou & Denitsa Stoyanova, 2007. "The Anachronism of the Voice‐Exit Paradigm: institutional investors and corporate governance in the UK," Corporate Governance: An International Review, Wiley Blackwell, vol. 15(6), pages 1070-1078, November.
    5. Photis Lysandrou, 2011. "Global Inequality and the Global Financial Crisis: The New Transmission Mechanism," Chapters, in: Jonathan Michie (ed.), The Handbook of Globalisation, Second Edition, chapter 27, Edward Elgar Publishing.
    6. Photis Lysandrou, 2011. "Forum 2011," Development and Change, International Institute of Social Studies, vol. 42(1), pages 183-208, January.

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