Abstract
The aim of our study is to examine the dynamics of trading volume and number of trades around jumps detected in intraday stock returns. We detect jumps in equally spaced 10-minute returns for most liquid stocks quoted on the Warsaw Stock Exchange within one-year sample period. We match jumps with macroeconomic and firm specific news. We find that only minority of jumps is associated with public information releases, whereas majority of them is motivated by liquidity shocks observed in the spreads, volume and the number of trades. Our findings show that jumps are related to inability of the market to absorb new and big orders. Liquidity shocks in quoted spread, volume and number of trades are the key drivers causing the occurrence of the jumps. Finally, the introduction of faster and more efficient trading system enhanced the impact of liquidity on the price formation process.
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