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Nonlinear intraday trading invariance in the Russian stock market

Using high-frequency transaction-level data for liquid Russian stocks, we empirically reveal a joint nonlinear relationship between the average trade size, log-return variance per transaction, trading volume, and the asset price level described by the Intraday Trading Invariance hypothesis. The rela...

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Detalles Bibliográficos
Autores principales: Teplova, Tamara, Gurov, Sergei
Formato: Online Artículo Texto
Lenguaje:English
Publicado: Springer US 2022
Materias:
Acceso en línea:https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8994700/
https://www.ncbi.nlm.nih.gov/pubmed/35431385
http://dx.doi.org/10.1007/s10479-022-04683-7
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author Teplova, Tamara
Gurov, Sergei
author_facet Teplova, Tamara
Gurov, Sergei
author_sort Teplova, Tamara
collection PubMed
description Using high-frequency transaction-level data for liquid Russian stocks, we empirically reveal a joint nonlinear relationship between the average trade size, log-return variance per transaction, trading volume, and the asset price level described by the Intraday Trading Invariance hypothesis. The relationship is also confirmed during stock market crashes. We show that the invariance principle explains a significant fraction of the endogenous variation between market activity variables at the intraday and daily levels. Moreover, our tests strongly reject the mixture of distributions hypotheses that assume linear relationships between log-return variance and transaction intensity variables such as trading volume or the number of transactions. We demonstrate that the increase in the ruble risk transferred by one bet per unit of business time was accompanied by the rise in the average spread cost. Different aggregation schemes are used to mitigate the impact of errors-in-variables effects. Following the predictions of the Information Flow Invariance hypothesis, we also study the relationship between trading activity and the information process approximated by either the flows of news articles or Google relative search volumes of Russian stocks over the 2018–2021 period. The evidence suggests that a sharp increase in the number of retail investors who entered the Moscow Exchange in 2020 entailed a higher synchronization between trading activity and search queries in Google since February 2020, in contrast to the arrival rates of news articles. The changes are driven by the increasing influence of the trading behavior of individual investors using Google Search rather than professional news services as the main source of information.
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spelling pubmed-89947002022-04-11 Nonlinear intraday trading invariance in the Russian stock market Teplova, Tamara Gurov, Sergei Ann Oper Res Original Research Using high-frequency transaction-level data for liquid Russian stocks, we empirically reveal a joint nonlinear relationship between the average trade size, log-return variance per transaction, trading volume, and the asset price level described by the Intraday Trading Invariance hypothesis. The relationship is also confirmed during stock market crashes. We show that the invariance principle explains a significant fraction of the endogenous variation between market activity variables at the intraday and daily levels. Moreover, our tests strongly reject the mixture of distributions hypotheses that assume linear relationships between log-return variance and transaction intensity variables such as trading volume or the number of transactions. We demonstrate that the increase in the ruble risk transferred by one bet per unit of business time was accompanied by the rise in the average spread cost. Different aggregation schemes are used to mitigate the impact of errors-in-variables effects. Following the predictions of the Information Flow Invariance hypothesis, we also study the relationship between trading activity and the information process approximated by either the flows of news articles or Google relative search volumes of Russian stocks over the 2018–2021 period. The evidence suggests that a sharp increase in the number of retail investors who entered the Moscow Exchange in 2020 entailed a higher synchronization between trading activity and search queries in Google since February 2020, in contrast to the arrival rates of news articles. The changes are driven by the increasing influence of the trading behavior of individual investors using Google Search rather than professional news services as the main source of information. Springer US 2022-04-10 /pmc/articles/PMC8994700/ /pubmed/35431385 http://dx.doi.org/10.1007/s10479-022-04683-7 Text en © The Author(s), under exclusive licence to Springer Science+Business Media, LLC, part of Springer Nature 2022 This article is made available via the PMC Open Access Subset for unrestricted research re-use and secondary analysis in any form or by any means with acknowledgement of the original source. These permissions are granted for the duration of the World Health Organization (WHO) declaration of COVID-19 as a global pandemic.
spellingShingle Original Research
Teplova, Tamara
Gurov, Sergei
Nonlinear intraday trading invariance in the Russian stock market
title Nonlinear intraday trading invariance in the Russian stock market
title_full Nonlinear intraday trading invariance in the Russian stock market
title_fullStr Nonlinear intraday trading invariance in the Russian stock market
title_full_unstemmed Nonlinear intraday trading invariance in the Russian stock market
title_short Nonlinear intraday trading invariance in the Russian stock market
title_sort nonlinear intraday trading invariance in the russian stock market
topic Original Research
url https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8994700/
https://www.ncbi.nlm.nih.gov/pubmed/35431385
http://dx.doi.org/10.1007/s10479-022-04683-7
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