The Relationship among Volatility, Volume, Bid-Ask Spread and Number of Brokers Evidence from Intra-Day Data on the Hong Kong Stock Market

Hung-Gay Fung, Chuan-Yang Hwang and Wai-Kin Leung
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Hung-Gay Fung: School of Business Administration, University of Missouri — St. Louis, Missouri, USA;
Chuan-Yang Hwang: Department of Finance, Hong Kong University of Science and Technology, Hong Kong, China
Wai-Kin Leung: School of Business, University of Hong Kong, Hong Kong, China

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 1998, vol. 01, issue 03, 303-320

Abstract: This study is the first to use minute-by-minute data to examine thesimultaneousinterrelationship among volatilities, volume, bid-ask spread, and the number of brokers for three actively-traded Hong Kong companies between October 2 and December 29, 1995. The results indicate that high volatility is typically associated with high volume, a large bid-ask spread, and a large number of brokers. Volume is found to be positively related to volatility and negatively related to the number of brokers. This result confirms the observation that large stock trades in Hong Kong are conducted by a small group of brokers who derive business primarily from the institutional investors. More brokers and high volatility tend to increase the bid-ask spread, while high volume decreases it. Finally, we find that the number of participating brokers in the market is positively related to the lagged volatility and negatively related to the lagged volume and bid-ask spread.

JEL-codes: G1 G2 G3 (search for similar items in EconPapers)
Date: 1998
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DOI: 10.1142/S021909159800020X

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