Intraday Seasonalities and Nonstationarity of Trading Volume in Financial Markets: Individual and Cross-Sectional Features

TL;DR

This study analyzes the intraday statistical properties of trading volume in Dow Jones stocks from 2003 to 2014, revealing non-stationarity, effects of financial crises, and regulatory changes on trading patterns.

Contribution

It provides a detailed quantitative analysis of intraday volume dynamics and their evolution over time, highlighting the impact of major financial events and regulations.

Findings

The U-shape of trading volume changed significantly after 2008.

The last trading session segment became steeper, likely due to SEC rules in 2007.

Morning and afternoon trading sessions exhibit distinct statistical features.

Abstract

We study the intraday behaviour of the statistical moments of the trading volume of the blue chip equities that composed the Dow Jones Industrial Average index between 2003 and 2014. By splitting that time interval into semesters, we provide a quantitative account of the non-stationary nature of the intraday statistical properties as well. Explicitly, we prove the well-known U-shape exhibited by the average trading volume-as well as the volatility of the price fluctuations-experienced a significant change from 2008 (the year of the sub-prime financial crisis) onwards. That has resulted in a faster relaxation after the market opening and relates to a consistent decrease in the convexity of the average trading volume intraday profile. Simultaneously, the last part of the session has become steeper as well, a modification that is likely to have been triggered by the new short-selling rules that were introduced in 2007 by the Securities and Exchange Commission. The combination of both results reveals that the has been turning into a t. Additionally, the analysis of higher-order cumulants namely the skewness and the kurtosis-shows that the morning and the afternoon parts of the trading session are each clearly associated with different statistical features and hence dynamical rules. Concretely, we claim that the large initial trading volume is due to wayward stocks whereas the large volume during the last part of the session hinges on a cohesive increase of the trading volume. That dissimilarity between the two parts of the trading session is stressed in periods of higher uproar in the market.