Title page for ETD etd-11022004-113244


Type of Document Dissertation
Author Rauterkus, Stephanie Yates
Author's Email Address srauterkus@siena.edu
URN etd-11022004-113244
Title The Interrelations Between Investor Beliefs, Information and Market Liquidity
Degree Doctor of Philosophy (Ph.D.)
Department Finance (Business Administration)
Advisory Committee
Advisor Name Title
Gary Sanger Committee Chair
Ji-Chai Lin Committee Member
Robert Newman Committee Member
William Lane Committee Member
Craig Freeman Dean's Representative
Keywords
  • trading volume
  • liquidity
  • information
Date of Defense 2004-09-30
Availability unrestricted
Abstract
I use two datasets to test the relation between trading volume, the heterogeneity of beliefs and the heterogeneity of belief revisions. The first dataset allows me to construct two groups that proxy for ‘holders’ and ‘non-holders’ of a traded asset. This construct allows me to test the relation between changes in trading volume and changes in the dispersion of beliefs both within and across these two groups. I examine changes in within- and across-group dispersion separately and simultaneously. The second dataset allows me to examine belief revisions more closely by analyzing only those prior and posterior beliefs surrounding an information event. I examine the impact of specific belief revision phenomena on trading volume.

My results provide evidence that without regard to specific information events, trading volume is positively related to any change in within-group or across-group dispersion whether this dispersion is measured separately or simultaneously. Second, I provide evidence that this result holds regardless of the specific characteristics of the belief revisions. This result provides further definition to the findings of Kandel and Pearson (1995) and Bamber, Barron and Stober (1999). Finally, my results suggest that extreme belief revisions such that investors with higher valuations subsequently hold lower valuations (‘flips’) have a highly positive and significant relation to changes in market liquidity.

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