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Recent trends in trading activity and market quality

Tarun Chordia, +2 more
- 01 Aug 2011 - 
- Vol. 101, Iss: 2, pp 243-263
TLDR
Turnover has been associated with more frequent smaller trades, which have progressively formed a larger fraction of trading volume over time as discussed by the authors, suggesting professional investing as a key contributor to the turnover trend.
About: 
This article is published in Journal of Financial Economics.The article was published on 2011-08-01 and is currently open access. It has received 344 citations till now. The article focuses on the topics: Volatility (finance).

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Joel Hasbrouck, +1 more
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Review: Text mining for market prediction: A systematic review

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Liquidity Measurement Problems in Fast, Competitive Markets: Expensive and Cheap Solutions

Craig W. Holden, +1 more
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The Media and the Diffusion of Information in Financial Markets: Evidence from Newspaper Strikes

Joel Peress
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References
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Common risk factors in the returns on stocks and bonds

Eugene F. Fama, +1 more
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TL;DR: In this article, the authors identify five common risk factors in the returns on stocks and bonds, including three stock-market factors: an overall market factor and factors related to firm size and book-to-market equity.
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TL;DR: In this article, the authors show that strategies that buy stocks that have performed well in the past and sell stocks that had performed poorly in past years generate significant positive returns over 3- to 12-month holding periods.
Frequently Asked Questions (10)
Q1. What have the authors contributed in "Recent trends in trading activity and market quality" ?

Turnover has increased the most for stocks with the greatest level of institutional holdings, suggesting professional investing as a key contributor to the turnover trend this paper. 

These and other issues are left for future research. 

The results indicate that more negative or more positive returns both imply increased turnover, and the variables interacted with the post 2000 dummy are all statistically significant, clearly implying a stronger relation between turnover and the return variables in recent years. 

Though French (2008) shows that direct holdings of individuals have declined (from about 47% in 1980 to about 22% in 2006), the enhanced ease of trading may have increased trading by individual investors, thus influencing the turnover trend. 

the explanatory power of the regression increases by just 2% when these potential determinants are added to the regression. 

About 88% of the time-series variation in turnover can be explained by these variables alone, and these variables are all positive and significant, confirming the dramatic up-trend in trading activity. 

Such phenomena may enable them to trade on private information more effectively because decreased trading frictions may increase returns from information-based trading. 

The decrease in the mean level may be due to the aftermath of the stock price rise and fall in the tech sector and the recent financial crisis.30 Overall, changes in either of the three turnover determinants are either not large enough or are of the wrong sign, thus indicating that they likely cannot justify the dramatic increase in turnover in recent years. 

The second variable, intended to capture changes in long-term momentum, is the absolute value of the compounded return from month t-2 to month t-6, where t is the month in which turnover is measured. 

It can be seen that for the group with the largest institutional holdings, small trade turnover has increased by about 0.2% to 6.3% across22