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Review of Quantitative Finance and Accounting

, Volume 25, Issue 2, pp 91–124 | Cite as

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

  • Shafiqur Rahman
  • Chandrasekhar Krishnamurti
  • Alice C. Lee
Article

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.

Keywords

intra-day dynamics depth volatility trading activity vector auto-regression 

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Copyright information

© Springer Science + Business Media, Inc. 2005

Authors and Affiliations

  • Shafiqur Rahman
    • 1
  • Chandrasekhar Krishnamurti
    • 2
  • Alice C. Lee
    • 3
  1. 1.Professor of Banking and Finance, School of Business AdministrationPortland State UniversityPortlandUSA
  2. 2.Associate Professor of Banking and Finance, Nanyang Business SchoolNanyang Tech UniversitySingapore
  3. 3.Assistant Professor of FinanceSan Francisco State UniversitySan FranciscoUSA

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