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Direct evidence of non-trading on the London Stock Exchange

Direct evidence of non-trading on the London Stock Exchange
Direct evidence of non-trading on the London Stock Exchange
The extent of non-trading is shown to be much greater in the UK than in the more heavily researched US equity markets. Over the period 1975 to 1995 we find that almost 44% of all stocks in our sample failed to trade on the last day of a given month, a figure which is significantly higher than for stocks in the US (see Foerster and Keim, 1993). In this paper we investigate the relationship between the non-trading of UK stocks and the autoregressive and seasonal behaviour of UK stock returns. In addition, we find that stocks are much more likely to be recorded as not having traded on the last day of the month in the period prior to April 1981 than after this date. We trace this result to a reporting requirement change on the London Stock Exchange and investigate whether the change has any real implications for systematic risk estimates over this period. We also find that alternative methods for calculating betas, in the presence of thin trading, are very sensitive to stock size and to non-trading.
thin trading, seasonality, return autocorrelation, risk measurement
0306-686X
29-53
Clare, A.
a98c3503-c9fe-433f-8092-1d68c80f876c
Morgan, G.
837bc55b-850e-4f6d-9253-e38781bf5f1e
Thomas, S.
0f83004b-179e-4b71-8374-25345d0e9dad
Clare, A.
a98c3503-c9fe-433f-8092-1d68c80f876c
Morgan, G.
837bc55b-850e-4f6d-9253-e38781bf5f1e
Thomas, S.
0f83004b-179e-4b71-8374-25345d0e9dad

Clare, A., Morgan, G. and Thomas, S. (2002) Direct evidence of non-trading on the London Stock Exchange. Journal of Business Finance & Accounting, 29 (1-2), 29-53.

Record type: Article

Abstract

The extent of non-trading is shown to be much greater in the UK than in the more heavily researched US equity markets. Over the period 1975 to 1995 we find that almost 44% of all stocks in our sample failed to trade on the last day of a given month, a figure which is significantly higher than for stocks in the US (see Foerster and Keim, 1993). In this paper we investigate the relationship between the non-trading of UK stocks and the autoregressive and seasonal behaviour of UK stock returns. In addition, we find that stocks are much more likely to be recorded as not having traded on the last day of the month in the period prior to April 1981 than after this date. We trace this result to a reporting requirement change on the London Stock Exchange and investigate whether the change has any real implications for systematic risk estimates over this period. We also find that alternative methods for calculating betas, in the presence of thin trading, are very sensitive to stock size and to non-trading.

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More information

Published date: 2002
Keywords: thin trading, seasonality, return autocorrelation, risk measurement

Identifiers

Local EPrints ID: 35962
URI: http://eprints.soton.ac.uk/id/eprint/35962
ISSN: 0306-686X
PURE UUID: 0050ef47-5d56-402d-9a00-6c187f83e7a6

Catalogue record

Date deposited: 24 May 2006
Last modified: 15 Jul 2019 19:05

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Contributors

Author: A. Clare
Author: G. Morgan
Author: S. Thomas

University divisions

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