文档介绍：A Theory of the Interday
Variations in Volume,
Variance, and Trading Costs
in Securities Markets
F. Douglas Foster
S. Viswanathan
Duke University
In an adverse selection model of a securities mar-
ket with one informed trader and several liquidity
traders, we study the implications of the assump-
tion that the informed trader has more informa-
tion on Monday than on other days. We examine
the interday variables in volume, variance, and
adverse selection costs, and find that on Monday
the trading costs and the variance of price changes
are highest, and the volume is lower than on Tues-
day. These effects are stronger for firms with better
public reporting and for firms with more discre-
tionary liquidity trading.
In a securities market in which there are differentially
informed traders, market makers must cover their
losses from transactions with informed traders by
charging a spread from all traders. Bagehot (1971)
Financial support from the Business Associates Fund, the Futures and Options
Research Center at Duke University, and the UNISYS Fund is greatly appre-
ciated. We thank the seminar participants at the AFA Meetings in New York
City, Duke University/UNC-Chapel Hill, the EFA Meetings in Istanbul, Geor-
gia Institute of Technology, MIT, the University of Minnesota, Northwestern
University, The University of Wisconsin-Madison, and the Western Finance
Meetings in San Diego. We are especially grateful for ments
from Michael Brennan (the Editor). We also received ments
from Kent Daniels, Jerome DeTemple, Michael Fishman, Campbell Harvey,
Joel Hasbrouck, David Hirshleifer, Nancy Keeshan, M. Wayne Marr, Kevin
McCardle, Robert Nau, Maureen O’Hara, e Oldfield, John Parsons,
David Sappington, David Scharfstein, Tom Smith, and Robert Whaley. The
ments from the referee, Anat Admati, improved the article con-
siderably. Address reprint requests to F. Douglas Foster, The Fuqua School
of Business, Duke University, Durham, NC 27706.
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