Archive for the ‘Stock Volume’ Category

How often are stocks traded?

July 17, 2011 Leave a comment

I know how many times I have been trading stocks.  So, I wonder how much stock gets traded in general and what the average amount of stock being traded is.  This blog entry will attempt to get a handle on how much gets traded in general and then compare it to how much an average person trades and finally compare to how much I have been trading.

The first place I looked for this information was the Census data which proved very interesting.  I came across a Net Equity/Stock Purchases by year.  This shows if money went in (a positive number) or went out of the Stock Market.  The following is 2000 – 2009 net purchases/sales in billions of dollars:

The 5 billion dollar in 2000 means that there was just about as much coming into the stock market as leaving it.  You can see in 2005 through 2007 money was leaving the market.  And in 2008 and 2009 it was coming in.  Compare this to the NYSE Year End Closing Price percent change in these years.

You can’t draw too many conclusions from this except to say in the last downturn people were getting out of the market before the big downturn and got back into it during the recovery.  You didn’t see the same pattern exactly in the bubble burst of 2002, so, it is hard to say for certain that the smart money left before the downturns.

In any case, while this has given some insight into how much in dollars goes into and out of the market from a net perspective, it doesn’t answer how much stock is traded.    An obvious candidate is just the sheer volume numbers.  Looking at the NYSE & NASDAQ, they have a volume of about 1.7 Trillion Shares a year that are traded.  These shares are traded with 5.4 Billion Transactions (i.e. number of actual trades).  Again, like in previous blog postings, I have a hard time wrapping my head around the concept of a trillion.  So, looking at some other numbers to get a perspective it means.  I will put it in terms of stocks traded per family.  There are 95.6 million families in the US (305 Million People / 3.19 People per Family).  So, for each US Family they trade as follows:

Stocks Traded per Family = 1.7 Trillion Stocks / 95.6 Million Families = 18,052 Stocks Traded per Family

Trades Made per Family = 5.4 Billion / 95.6 Million Families = 58 Trades a Year

So, much for buy and hold strategy.  In a previous blog entry I determined that about half the stock was owned by individual people.  That means to me that about half this 18,000 Stocks and 58 trades per year for a given family are being traded by Exchange Funds, Mutual Funds, Pension Funds and the like for them.  That would mean that an average Individual Investor trading for his family should trade about 9,000 shares per year in 29 trades on their own as an individual investor.  This means that the average trade size would be about 300 shares.  The trade size seems right, but, the 29 trades seems a little high to me.

To double check these numbers, I will look at my own trading.  I consider myself a fairly active trader that has traded quite a bit based on technical indicators.  So, looking at my portfolio strategy, for the first half of the year, I was shocked that I traded (bought or sold) about 90,000 shares of stock and made 57 trades.  So, that would mean for a year, I would expect to have traded around 180,000 shares and 114 trades which would be quite a bit above the average I came up with.  I know that a lot of the professionals are day trading, adjusting positions daily, etc.  So, maybe these numbers are legit.  They certainly seem reasonable given a mix of active traders and buy and hold types.

Another interesting fact is that the Market Capitalization for NYSE & NASDAQ was around 17 Trillion Dollars in 2010 and the Value of all the Shares Traded was 30 Trillion.  That means that an average portfolio “turns over” about 1.8 times a year (30/17).  Taking this a step further it would mean that an average investor holds on to a stock for less than 7 months (12 months / 1.8 Turnover).  If the average investor has around the $107,000 I calculated in previous blog that means he trades about $190,000 of stock per year.    So, to summarize, my mythical average family investor does the following:

  • Has a portfolio of around $107,000
  • Makes 29 Trades a Year
  • Assuming that they use discount brokers spends about $300 a year to trade stock
  • Trades 9,000 Shares a Year
  • Makes an average size trade of 300 shares per trade
  • Turns over his portfolio 1.8 times a year

But, we all know that there is no average family investor.  When I look at friends and family who own stock, I know that most people are either not trading stock at all or probably not doing it very actively.   So all our mythical average family investors are in there with the professionals trading stock, the question to be asked is are the  professionals the high volume traders or is it our average family investor.

Categories: Stock Volume, Stocks