We examine how the interactions of trades among different investors affect market volatility. We find that market volatility increases when certain groups of investors interact more intensively in the market. Our result shows that market volatility increases more than 35% compared to the average level of volatility when there is greater market participation by investors whose trading patterns are less likely to provide liquidity to each other. The result is robust even after adjusting for the

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... latility-volume relation, which implies that investor interactions contain information that explain volatility in addition to explanation provided by total trading volume. We also find that individual investors buy stocks persistently as market becomes volatile, which in return might increase the persistence of market volatility over time. Andrews, Donald, 1991, Heteroskedasticity and autocorrelation consistent covariance matrix estimation, Econometrica, 59, 817-858. Barber, Brad M., and Terrance Odean, 2002, All that glitters: The effect of attention and news on the buying behavior of individual and institutional investors,