The length of the trading day and trading volume

Abstract

As the financial literature has documented, trading volume is generally affected by information releases, extreme returns, herd instinct, overconfidence, panic and volatility. In this study, we provide further empirical evidence that the extension of trading hours has a positive effect on trading volume. Using data from the last 12 years, during which the Tel Aviv Stock Exchange extended its trading hours on several occasions, we demonstrate that our findings hold true after controlling for proxies for world market returns and volatility, time trends, macroeconomic announcements and suicide attacks. We discuss several theories that may explain the results obtained. Furthermore, we show that cross-listed stocks attract more trading and explain the majority of the change in the volume of stocks traded. The findings may have implications for those who design policy for the exchange markets worldwide, because the majority of their revenues come from transactions and clearing fees.

COVID-19, government policy responses, and stock market liquidity around the world: A note

“…Following the general approach established in earlier studies of stock market liquidity ( Scharnowski, 2020 ; Qadan and Aharon, 2019 ; Chordia et al, 2001 ), we add several control variables. Specifically, we control for contemporaneous and lagged market returns ( R t , R t-1 ), contemporaneous volatility measured as the absolute return on day t ( AbsR t ), past volatility estimated as the average absolute return through trading days t -1 to t -5 ( Vol t-1 ), market capitalization ( MV t-1 ), market-wide price-to-earnings ratio ( PE t-1 ), and weekday dummies for the day of the week effect.…”