Information Content of Market Movements

In this research, changes in the daily values of stock prices are compared to the changes in the number of stocks advancing, declining or remaining unchanged on the New York Stock Exchange. It is hypothesized that changes in the volume of trading as well as their associated changes in prices contain...

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Bibliographic Details
Published inThe Journal of business and economic studies (Fairfield, Conn.) Vol. 19; no. 2; p. 26
Main Author Lashgari, Malek
Format Journal Article
LanguageEnglish
Published Eastchester Northeast Business & Economics Association 01.10.2013
Subjects
Common stock
Dow Jones averages
Efficient markets
Institutional investments
Rates of return
Securities prices
Securities trading volume
Stock exchanges
Stock prices
Studies
Trends
United States > US
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Summary:In this research, changes in the daily values of stock prices are compared to the changes in the number of stocks advancing, declining or remaining unchanged on the New York Stock Exchange. It is hypothesized that changes in the volume of trading as well as their associated changes in prices contain useful information regarding the next day move in the market. An information theoretic construct is used to integrate the probability distributions of changes in price and volume of trading in common stock in order to find their relationship. It is shown that the breadth of the market as measured by the number of shares of common stock advancing, declining or showing no-change, appears to show the direction of the market. The results shown in this paper are important for professional money managers and forecasters in that if the direction of movements in the market is predictable, over the short or the long run, investors would more likely be pursuing active trading strategies.
ISSN:1063-343X
2576-3458