Changes in the Turnover Ratio and Liquidity in International Equity Markets

Abstract

We study trading over 15 years and compare trends internationally. We find European turnover has grown but less than others while turnover ratios have declined. But this decline is exaggerated in standard volume data, which focuses on primary market trading, and is comparable to other countries after adjusting the North American data. Overall, we observe a universal decrease in market turnover ratios accompanied by declining volatility; the European decline is significant, although not as large as that in the U.S. Despite the decrease in turnover ratios, lower market uncertainty and yield spreads potentially mitigate the extent of the observed decline.