A Statistical Analysis of Intraday Liquidity, Returns and Volatility of an Individual Stock from the Istanbul Stock Exchange

Abstract

This paper seeks whether the intraday patterns observed in most stock markets hold for an individual stock from the Istanbul Stock Exchange where the trading ceases for two hours during lunchtime. It investigates the most treated topics in market finance like liquidity, returns and volatility through their various indicators by periodically regrouping transaction data and making use of parametric and nonparametric tests. It excludes the analysis of spread due to its uninformativeness in the presence of very discrete prices. The results show that liquidity-related variables' path can be described by an asymmetric "W" curve, namely an "inverse J" curve in the morning session and a "U" curve in the afternoon session. While returns do not exhibit a precise path, overnight returns are apparent. Price and return volatilities are very high in level and stable during the day. Sensitivity analysis suggests that choice of 5-minute versus 15-minute intervals slightly matters.