The elusive nature of motives to trade: Evidence from international stock markets

We analyse investors' motives for trading on stock markets in G-7 countries and investigate whether evidence for these motives is robust when time-varying market volatility, changes between calm and turbulent periods, and existence of international financial spillovers are controlled for. By applying the Markov-switching GARCH specification to a model of the dynamic return-volume relationship, we find that trades conducted due to liquidity needs or driven by private information cannot be identified unequivocally in any market, and positive feedback trading becomes predominant when return spillovers from the US market are taken into account.