Volatility in US and European equity markets: An assessment of market quality

Deniz Ozenbas, Robert A. Schwartz, Robert A. Wood

Research output: Contribution to journalArticle

24 Citations (Scopus)

Abstract

The paper examines intra-day share price volatility over the year 2000 for five market centres: the New York Stock Exchange, Nasdaq, the London Stock Exchange, Euronext Paris and Deutsche Börse. In each of these markets, we observe a U-shaped intra-day volatility pattern, a particularly sharp spike for the opening half hour, and a general level of intra-day volatility that is accentuated vis-à-vis volatility over longer differencing intervals, e.g. daily and weekly periods. We suggest that the volatility accentuation is attributable to spreads, market impact, price discovery and momentum trading - all of which are either trading costs or exist because of trading costs. Because the magnitude of trading costs depends in part on market design, we also suggest that a link exists between intra-day volatility and market structure, and that market quality/efficiency on both sides of the Atlantic could be improved.

Original languageEnglish
Pages (from-to)437-461
Number of pages25
JournalInternational Finance
Volume5
Issue number3
DOIs
StatePublished - 1 Jan 2002

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equity
market
stock exchange
costs
cost
volatility
Equity markets
Market quality
Intraday volatility
Trading costs
momentum
efficiency
price
Market design
Nasdaq
Price volatility
Market structure
Price discovery
London Stock Exchange
Share prices

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Ozenbas, Deniz ; Schwartz, Robert A. ; Wood, Robert A. / Volatility in US and European equity markets : An assessment of market quality. In: International Finance. 2002 ; Vol. 5, No. 3. pp. 437-461.
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Volatility in US and European equity markets : An assessment of market quality. / Ozenbas, Deniz; Schwartz, Robert A.; Wood, Robert A.

In: International Finance, Vol. 5, No. 3, 01.01.2002, p. 437-461.

Research output: Contribution to journalArticle

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