Volume Autocorrelation, Information and Investor Trading

31 Pages Posted: 3 Nov 2003

See all articles by Vicentiu Covrig

Vicentiu Covrig

California State University, Northridge - Department of Finance, Financial Planning and Insurance

Lilian Ng

Schulich School of Business, York University; European Corporate Governance Institute (ECGI)

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Abstract

This study investigates whether the widely documented daily correlated trading volume of stocks is driven by individual investor trading, institutional trading, or both. We find that at least 95 percent of NYSE and AMEX stocks exhibit statistically significant, positive serial correlation. Volume autocorrelation decreases with the level of institutional ownership of a stock. We also show that the rate of arrivals of new information to the market contributes to the clustering of the trades. When there is high information flow to the market, institutional trading generates a more pronounces effect on volume autocorrelation than individual investor trading. Our results are broadly consistent with the predictions of trading volume patterns suggested by most theoretical models of stock trading and by empirical research on investor trading.

Keywords: institutions, autocorrelation, information flow

JEL Classification: G12, G14, G20

Suggested Citation

Covrig, Vicentiu and Ng, Lilian, Volume Autocorrelation, Information and Investor Trading. Available at SSRN: https://ssrn.com/abstract=442200 or http://dx.doi.org/10.2139/ssrn.442200

Vicentiu Covrig

California State University, Northridge - Department of Finance, Financial Planning and Insurance ( email )

Northridge, CA 91330-8379
United States

Lilian Ng (Contact Author)

Schulich School of Business, York University ( email )

N223, Seymour Schulich Building
4700 Keele Street
Toronto, Ontario ON M3J 1P3
Canada
+1.416.736.2100 x77994 (Phone)

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

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