Volume, or trading volume, is a term in capital markets, referring to the number of shares or contracts traded in a security

Security (finance)

A security is generally a fungible, negotiable financial instrument representing financial value. Securities are broadly categorized into:* debt securities ,* equity securities, e.g., common stocks; and,...

 or in an entire market during a given period of time.

In the context of stock

Stock

The capital stock of a business entity represents the original capital paid into or invested in the business by its founders. It serves as a security for the creditors of a business since it cannot be withdrawn to the detriment of the creditors...

 trading on a stock exchange

Stock exchange

A stock exchange is an entity that provides services for stock brokers and traders to trade stocks, bonds, and other securities. Stock exchanges also provide facilities for issue and redemption of securities and other financial instruments, and capital events including the payment of income and...

, the volume is commonly reported as the number of shares that changed hands during the day. Average volume is reported as the average volume over a longer period of time, normally one to three months. When the significant positive or negative news is made public about a company, the volume of the company's stock will usually deviate from its average volume, meaning that more people are trading this stock.

Higher volume for a stock is an indicator of higher liquidity. For institutional investors who wish to sell a large number of shares of a certain stock, lower volume will force them to sell the stock slowly over a longer period of time.

Legal implications

The calculation of the volume of a security has some legal implications. For example, in the United States, a person who sells a certain number of shares of a security in proportion to its weekly volume may be deemed an underwriter of that security under Rule 144 of the Securities Act of 1933. The calculation of the trading volume is therefore regulated by the SEC.