A Fine Lens on Common Trading Flows

Yi Ding () and Songze Shi ()
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Yi Ding: Faculty of Business Administration, University of Macau
Songze Shi: Faculty of Business Administration, University of Macau

No 202641, Working Papers from University of Macau, Faculty of Business Administration

Abstract: We study systematic trading activities at ultra-high frequencies and their implications for price formation. A continuous-time, high-dimensional factor model is proposed for stock trading volume. This model features a Common Trading Intensity (CTI) factor that captures common trading flow. We develop estimation and inference theories for studying the fine dynamics of CTI. Using trading volume data from U.S. equities, we find strong negative temporal dependence in short-horizon CTI movements, pointing to the presence of intraday systematic liquidity frictions. Moreover, large negative CTI shocks are followed by brief intraday price adjustments that unwind rapidly, suggesting e!cient intraday systematic liquidity rebalancing.

Keywords: trading volume; common trading intensity; volatility; high-frequency data; factor model; price formation (search for similar items in EconPapers)
JEL-codes: C32 C38 C55 C58 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2026-06
New Economics Papers: this item is included in nep-mst
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Published in UM-FBA Working Paper Series

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