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Stock return volatility in thinly traded markets. An empirical analysis of trading and non-trading processes for individual stocks in the Norwegian thinly traded equity market

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  • P. B. Solibakke

Abstract

This paper reports studies of the volatility of prices for individual stocks in the thinly traded Norwegian equity market during periods of trading and non-trading when the market is open for trading and closed. Building a model using Brownian motions, returns and variance ratios in trading and non-trading periods can be hypothesized. The model presents results that show an identical volatility in periods in which the market is open but no trades occur, and in periods of frequent trading. Furthermore, when the market is closed (weekends and holidays), the volatility is almost identical to consecutive days of trading. That is, the observed that on correspondence between return variance and transaction arrival is dependent on whether the market is open, and not simply on whether the stock is trading. This finding prevails after adjusting for non-synchronous trading using Poisson distributed trade arrivals.

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  • P. B. Solibakke, 2000. "Stock return volatility in thinly traded markets. An empirical analysis of trading and non-trading processes for individual stocks in the Norwegian thinly traded equity market," Applied Financial Economics, Taylor & Francis Journals, vol. 10(3), pages 299-310.
    • Handle: RePEc:taf:apfiec:v:10:y:2000:i:3:p:299-310
    DOI: 10.1080/096031000331707
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    References listed on IDEAS

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    Cited by:

    1. Solibakke, Per Bjarte, 2001. "A stochastic volatility model specification with diagnostics for thinly traded equity markets," Journal of Multinational Financial Management, Elsevier, vol. 11(4-5), pages 385-406, December.
    2. P. B. Solibakke, 2005. "Non-linear dependence and conditional heteroscedasticity in stock returns evidence from the norwegian thinly traded equity market," The European Journal of Finance, Taylor & Francis Journals, vol. 11(2), pages 111-136.
    3. John Capstaff & Audun Klæboe & Andrew P. Marshall, 2004. "Share Price Reaction to Dividend Announcements: Empirical Evidence on the Signaling Model from the Oslo Stock Exchange," Multinational Finance Journal, Multinational Finance Journal, vol. 8(1-2), pages 115-139, March-Jun.
    4. P. B. Solibakke, 2001. "Efficiently ARMA-GARCH estimated trading volume characteristics in thinly traded markets," Applied Financial Economics, Taylor & Francis Journals, vol. 11(5), pages 539-556.

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