Daily Return Volatility, Bid-Ask Spreads, and Information Flow: Analyzing the Information Content of Volume

Jinliang Li and Chunchi Wu
Additional contact information
Chunchi Wu: Singapore Management University and Syracuse University

The Journal of Business, 2006, vol. 79, issue 5, 2697-2740

Abstract: This paper examines the relationship among daily information flow, return volatility, and bid-ask spreads based on the framework of the mixture of distribution hypothesis (MDH). The MDH model is modified to permit separate effects of informed and liquidity trading volume on return volatility. The results show that the positive relationship between volatility and volume is primarily driven by the informed component of trading. When we control for the information flow, volatility is negatively related to trading volume. Furthermore, bid-ask spreads are positively related to the intensity of information flow.

Date: 2006
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (29)

Downloads: (external link)
http://dx.doi.org/10.1086/505249 main text (application/pdf)
Access to the online full text or PDF requires a subscription.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ucp:jnlbus:v:79:y:2006:i:5:p:2697-2740

Access Statistics for this article

More articles in The Journal of Business from University of Chicago Press
Bibliographic data for series maintained by Journals Division ().