Top reasons why volumes are so low in the market.

Just the other day, i was talking to a remiser in the local market.  It's really difficult out there as retailers have all but stepped away from trading.  People just leave the market alone and aren't really interested in buying shares these days.  Thus remisers get less brokerage and find it difficult to survive.

So I thought long and hard about the reasons.  It's a pity, but I think some of the reasons have more to do with evolution rather than regression.

Low volumes have been a phenomenon not just in Malaysia, but all around the world. Evolution of the markets is probably a big reason for this phenomenon.

1.  Low retail particpants.  I think this has a lot to do with the advent of online trading and electronic trading. .  Online trading bring price quotation much more quickly and faster than trading through the phone.

Faster price quotation leads investors to generally be more prone to gambling issues.  Thus investors are more prone to be burned out and lose confidence.

A trend toward addictive trading behaviour among Canadian retail investors emerged during the transition from the use of telephones to personal computers to manage stock transactions, says Robert Williams, a professor at the University of Lethbridge and co-editor of the Routledge International Handbook of Internet Gambling.

“The instantaneous nature of online trading makes it a problem for people who possess impulsive tendencies to begin with,” he says. “We have a fairly efficient stock market and few people are capable of exploiting its inefficiencies. Yet typical problem traders think of themselves as smarter than the average person and park their statistical common sense at the door.”

2.  Inefficient market  places  have shown to be the best areas for people to "beat the market".   It's no longer easy to make a quick buck as markets become more efficient.  Although it is still possible, it's definitely harder.  Thus, fewer opportunities for investors.

The Fidelity study found significant long-term outperformance by active managers in segments of the stock market — international and smaller companies — often thought to give them the best chance of beating passively managed rivals. That’s because those asset classes are deemed less efficient in transmitting information to investors and therefore better able to be exploited by superior research.

Applying those filters, active management won out. The average active fund that met the criteria beat its benchmark by 0.18 percentage points, while the average index tracker trailed by 0.03 percentage points. 

So lower volumes in the world wide share markets are probably a product of the gambling characteristics in the online trading world and harder to find investments overall due to the market becoming more efficient.