Explaining Intraday Pattern of Trading Volume from the Order Flow Data Yi-Tsung Lee, Robert C.W. Fok and Yu-Jane Liu* 1. INTRODUCTION Extensive studies have documented a pattern of usually large trading volume at the market open, and in particular at the close in the New York Stock Exchange and Toronto Stock Exchange. For example, Wood, McInish and Ord (1985), McInish and Wood (1990a), McInish and Wood (1992) and Lockwood and Linn (1990) found U-shaped patterns for intraday returns and trading volume. Similar patterns have also been explored in some Asian stock markets. For instance, Chow, Lee, Liu and Liu (1994), Ho and Cheung (1991), as well as Ho, Cheung and Cheung (1993) found extremely large trading volume at the close in the Taiwan and Hong Kong stock markets. Hence, large trading volume around market open and close is a global phenomenon. Many researchers dedicate their efforts to explain why such patterns exist. McInish and Wood (1990b), Harris (1989) and Porter (1992) suggested that day-end effects might account for the pattern. Since different markets show similar intraday patterns of trading volume, trading mechanisms may not be Journal of Business Finance & Accounting, 28(1) & (2), January/March 2001, 0306-686X ß Blackwell Publishers Ltd. 2001, 108 Cowley Road, Oxford OX4 1JF, UK and 350 Main Street, Malden, MA 02148, USA. 199 * The authors are respectively from the National Chung Cheng University, Taiwan; Shippensburg University, USA; and the National Chengchi University, Taiwan. Yi-Tsung Lee would like to acknowledge the financial support of the National Science Council for research presented in this article from grant No. NSC 88-2416-H-194-002-88-053. (Paper received August 1998, revised and accepted February 2000) Address for correspondence: Yi-Tsung Lee, Department of Accounting, National Chung Cheng University, 160 San-Hsing, Ming-Hsiung, Chia-Yi 62117, Taiwan, ROC. e-mail: actytl@accunix.ccu.edu.tw