NUMBER OF TRANSACTIONS AND VOLATILITY: AN EMPIRICAL STUDY USING HIGH-FREQUENCY DATA FROM NASDAQ STOCKS

Our empirical evidence based on transactions data of a sample of NASDAQ stocks indicates that trades of large firms are related to the proxies of market-wide 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 market-wide information. For small and medium firms, the frequency of trades is positively associated with bid-ask spreads, apparently because of the adverse information content of trades.