This study investigates whether the widely documented daily correlated trading volume of stocks is driven by individual investor trading, institutional trading, or both. We find that at least 95% of NYSE and AMEX stocks exhibit statistically significant, positive serial correlation. Volume autocorrelation decreases with the level of institutional ownership of a stock. We also show that the rate of arrivals of new information to the market contributes to the clustering of trades. When there is high information flow to the market, institutional trading generates a more pronounced effect on volume autocorrelation than individual investor trading. Our results are broadly consistent with the predictions of trading volume patterns suggested by most theoretical models of stock trading and by empirical research on investor trading.

Pricing in the euroyen market is based on LIBOR, the London Interbank Offered Rate, set at 11:00AM London time or TIBOR, the Tokyo Interbank Offered Rate, set at 11:00AM Tokyo time. The changing TIBOR-LIBOR spread reflects the credit risk associated with Japanese banks or the “Japan premium”. The spread is modeled as a function of determinants of bank default and firm value. Systematic variation in the spread can be explained by interest rate and stock price effects along with public information flows of good and bad news regarding Japanese banking, with a separate role for bank credit downgrades and upgrades.