Cross-Sectional Trading Volume Concentration and Its Implication for Asset Pricing

• Main Authors: Chin-Te Yu, 游景德
• Other Authors: 陳聖賢
• Format: Others
• Language: en_US
• Published: 2012
• Online Access: http://ndltd.ncl.edu.tw/handle/77595453287292611631

博士 === 國立臺灣大學 === 財務金融學研究所 === 100 === This paper empirically studies the evolution of cross-sectional distribution of trading volume in U.S. stock market and its implication for asset pricing. We document high and increasing concentration of trading volume in the cross-sectional stocks over the period from 1963 to 2010. The top 20% actively-traded stocks supply more than 80% of aggregate trading volume (“80-20 rule”) and the percentage they account for shows significant uptrend. The evolution of trading volume concentration is inherently associated with (but has magnified) the similar evolution in market capitalization concentration. Additionally, we find that trading volume concentration is negatively associated with market return, market turnover and market liquidity and is positively associated with systematic risk and idiosyncratic risk in return. After controlling for these general market dynamics, we find that trading volume concentration is significantly explained both by institutional ownership (demand-side force) and by funding/trading cost (supply-side force) over the sample period. We also show that trading volume concentration captures investors’ time-varying liquidity preference and thus has systematic effects on asset pricing.