THE STOCK PRICE-VOLUME LINKAGE ON THE TORONTO STOCK EXCHANGE: BEFORE AND AFTER AUTOMATION

Çetin CİNER (Northeastern University)

This paper investigates the information content of trading volume on the Toronto Stock Exchange before and after the move towards fully electronic trading. It is argued that if price discovery improves under electronic trading, the predictive power of volume should be less significant. The empirical analysis supports more accurate price discovery under electronic trading. Results from both the structural and vector autoregression models indicate that the predictive power of volume for price variability disappears after full automation.