Assessing the intraday relationship between implied and historical volatility

Kawaller, Ira G.; Koch, Paul D.; Peterson, John

doi:10.1002/fut.3990140306

Cited by 15 publications

(13 citation statements)

References 28 publications

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“…7 See Chung (1993, 1995), Koch (1993), and Lamoureaux and Lastrapes (1994). 8 Time series studies that support this result include Bessembinder and Seguin (1992), Bessembinder et al (1996), Clark (1973), Cornell (1981), Epps and Epps (1976), Foster (1995), Garcia et al (1986), Grammatikos and Saunders (1986), Jain and Joh (1988), Karpoff (1987), Kawaller et al (1990), Kawaller et al (1994), Rutledge (1979), Upton and Shannon (1979), and Wood et al (1985).…”

Section: Economic Rationale For the Inverse Relation Between Volume Amentioning

confidence: 98%

Volume and Volatility Surrounding Quarterly Redesignation of the Lead S&P 500 Futures Contract

Kawaller¹,

Koch

Peterson

2001

Journal of Futures Markets

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microstructure of the futures exchange rather than new information or underlying volatility conditions. The event thus offers us an opportunity to examine how volatility responds to noninformation-based exogenous changes in volume. This study examines the volatility behavior of nearby and next out S&P 500 futures contracts on the 10 days surrounding quarterly redesignation of the lead contract. Our model measures possible changes in (a) the level of volatility and/or (b) the association between volume and volatility after redesignation of the lead contract. Results indicate that when we account for the association between volume and volatility, the higher volume lead contract consistently experiences a lower level of volatility. This outcome supports the view that the larger population of liquidity providers who trade the more active lead contract fosters greater market depth and lower volatility.

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Section: Economic Rationale For the Inverse Relation Between Volume Amentioning

confidence: 98%

Volume and Volatility Surrounding Quarterly Redesignation of the Lead S&P 500 Futures Contract

Kawaller¹,

Koch

Peterson

2001

Journal of Futures Markets

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“…Trading volume has been widely used as a measure for the rate of information arrival; it is the number of transactions in a futures contract during a specified period of time (see Sutcliffe, 2006). Trading volume is viewed as a proxy for new information, consistent with the sequential information model (Copeland, 1976) and the mixture of distributions hypothesis (Clark, 1973); these theories predict a positive relationship between daily volume and volatility (see, for example, Kawaller et al, 1990;Locke and Sayers, 1993;Kawaller et al, 1994;Wang andYau, 2000 for US, andBoard andSutcliffe, 1990;Ap Gwilym et al, 1999 for UK). Trading volume measures speculative demand for futures (Lucia and Pardo, 2010).…”

mentioning

confidence: 99%

Dynamic spillover effects in futures markets: UK and US evidence

Antonakakis

Floros

Kizys

2016

International Review of Financial Analysis

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Previous studies on spillover effects in future markets have so far confined themselves to static analyses. In this study, we use a newly introduced spillover index to examine dynamic spillovers between spot and futures market volatility, volume of futures trading and open interest in the UK and the US. Based on a dataset over the period February 25, 2008 to March 14, 2013, that encompasses both the global financial crisis and the Eurozone debt crisis, we find that spot and futures volatilities in the UK (US) are net receivers (net transmitters) of shocks to volume of futures trading and open interest. The analysis also sheds light on the dynamic interdependence of spot and futures market volatilities between the US and the UK. Specifically, the spot and futures volatility spillovers between the UK and US markets are of bidirectional nature, however, they are affected by major economic events such as the global financial and Eurozone debt crisis. Several robustness checks endorse our main findings. Overall, these results have important implications for various market participants and financial sector regulators.

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“…There is evidence that documented a positive relation between volume and volatility for different stock index futures at different frequencies of data. (See, for example, Kawaller et al (1994), and Gannon (1995) for intraday data, and Raghunathan and Peker (1997), ap Gwilym et al (1999), Wang and Yau (2000), Watanabe (2001), and Pati (2008) for daily data, and finally Wang (2002) for weekly data.) 1 There are also studies that indicate that lagged volume is related to volatility as well.…”

Section: Review Of Literaturementioning

confidence: 99%

Open and Closed Positions and Stock Index Futures Volatility

2011

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In this paper we analyze the relationship between volatility in index futures markets and the number of open and closed positions. We observe that, although in general both positions are positively correlated with contemporaneous volatility, in the case of S&P 500, only the number of open positions has influence over the volatility. Additionally, we observe a stronger positive relationship on days characterized by extreme movements of these contracting movements dominating the market. Finally, our findings suggest that daytraders are not associated to an increment of volatility, whereas uninformed traders, both opening and closing their positions, have to do with it.

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Assessing the intraday relationship between implied and historical volatility

Cited by 15 publications

References 28 publications

Volume and Volatility Surrounding Quarterly Redesignation of the Lead S&P 500 Futures Contract

Volume and Volatility Surrounding Quarterly Redesignation of the Lead S&P 500 Futures Contract

Dynamic spillover effects in futures markets: UK and US evidence

Open and Closed Positions and Stock Index Futures Volatility

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