Number of Transactions and Volatility: An empirical study using High-frequency data from NASDAQ Stocks

Abstract

Our empirical evidence based on transactions data of a sample of Nasdaq stocks indicates that trade of large firms are related to the proxies of marketwide and firm-specific information. For large firms, an increase in the number of trades seems to have a beneficial effect on liquidity as measured by bid-ask spreads. On the other hand, trades of small and medium firms are associated with firm-specific information and are not related to marketwide information. For small and medium firms, the frequency of trades in positively associated with bid-ask spreads, apparently beacuse of the adverse information content of trades.