Dual long-memory, structural breaks and the link between turnover and the range-based volatility

Karanasos, Menelaos; Kartsaklas, Aris

doi:10.1016/j.jempfin.2009.06.001

Cited by 20 publications

(21 citation statements)

References 52 publications

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“…Wang (2007) argues that foreign purchases tend to lower volatility, especially in the …rst few years after market liberalization when foreigners are buying into local markets. Karanasos and Kartsaklas (2008a) show that, in Korea, the causal negative impact from total volume to volatility re ‡ects the causal relation between foreign volume and volatility. Therefore, we investigate the signi…cance and the sign of the causal e¤ect.…”

Section: Introductionmentioning

confidence: 85%

“…In sharp contrast, foreign sales reduce investor base and increase volatility. Karanasos and Kartsaklas (2008a) …nd that, in Korea, the negative causal e¤ect from total volume to volatility re ‡ects the causal relation between foreign volume and volatility before the …nancial crisis.…”

Section: Economic Rationale For a Negative Volume-volatility Linkmentioning

confidence: 90%

“…(L) t ) = 0: As pointed out by Kawaller et al (2001), empirical evidence of an inverse relation between the two variables is rare in the literature, and it contrasts sharply with the widely held perception that the two are positively correlated (see also Karanasos and Kartsaklas, 2008a).…”

Section: Economic Rationale For a Negative Volume-volatility Linkmentioning

confidence: 96%

“…Even as the sophistication of …nancial markets improve around the world, and trading in …nancial derivatives spreads across emerging markets, the aforementioned literature is almost entirely restricted to developed country contexts. It is only recently that the development and …nancial literature have started exploring the impact of phenomena like market participation by foreign portfolio investors and expiration of derivatives contracts in emerging economies (see, for example, Vipul, 2005;Kim et al, 2005; Karanasos and Kartsaklas, 2008a;Wang, 2007). Few of these papers examine the e¤ect of the introduction of …nancial derivatives on cash market volatility (and none of them explores their e¤ects on the volume-volatility relationship), even though the market risk associated with such volatility is likely to have a greater economic in ‡uence on market participation by investors (and hence cost of capital) in emerging markets than in developed …nancial markets.…”

Section: Introductionmentioning

confidence: 99%

“…In this study we employ the classic range-based estimator of Garman and Klass (1980) (hereafter GK). The GK estimator is more e¢ cient than the traditional close-to-close estimator and exhibits very little bias, whereas the realized volatility constructed from high frequency data can possess inherent biases impounded by market microstructure factors (see Karanasos and Kartsaklas, 2008a and the references therein). We also use number of trades and value of shares traded as two alternative measures of volume.…”

Section: Introductionmentioning

confidence: 99%

See 4 more Smart Citations

Derivatives Trading and the Volume-Volatility Link in the Indian Stock Market

2008

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This paper investigates the issue of temporal ordering of the range-based volatility and volume in the Indian stock market for the period 1995-2007. We examine the dynamics of the two variables and their respective uncertainties using a bivariate dual long-memory model. We distinguish between volume traded before and after the introduction of futures and options trading. We …nd that in all three periods the impact of both the number of trades and the value of shares traded on volatility is negative. This result is in line with the theoretical argument that a marketplace with a larger population of liquidity providers will be less volatile than one with a smaller population. We also …nd that (i) the introduction of futures trading leads to a decrease in spot volatility, (ii) volume decreases after the introduction of option contracts and, (iii) there are signi…cant expiration day e¤ects on both the value of shares traded and volatility series.

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Section: Introductionmentioning

confidence: 85%

Section: Economic Rationale For a Negative Volume-volatility Linkmentioning

confidence: 90%

Section: Economic Rationale For a Negative Volume-volatility Linkmentioning

confidence: 96%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

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Derivatives Trading and the Volume-Volatility Link in the Indian Stock Market

2008

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Investors' trading behaviour and stock market volatility during crisis periods: A dual long‐memory model for the Korean Stock Exchange

et al. 2020

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This study examines the impact of investors’ buy and sell trades on Korean stock market volatility across two crisis events, the Asian crisis of 1997 and the 2008 global financial crash. We investigate the trading behaviour of domestic vs. foreign and institutional vs. individual investors. Our results suggest that the buy and sell trades have an asymmetric effect on volatility that depends on the type of investor trading and on the phase of the business cycle. Buy orders appear to be more informative than sell orders since they mostly lower volatility in the pre‐crisis periods, while sell and post‐crisis buy trades affect volatility positively regardless of who trades (institutional or individual investors) and on what information (member, non‐member). Most importantly, decomposing total buy and sell trades into trader‐type categories reveals that some institutional investors are more informed traders that stabilize the market compared to individuals that always increase volatility. Foreign investors reduce volatility with their purchases and total trading activity in the whole Asian crisis sample, but only in the pre‐crisis period before the recent global financial turmoil.

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Range Volatility: A Review of Models and Empirical Studies

Chou

Liu

2014

Handbook of Financial Econometrics and Statistics

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Dual long-memory, structural breaks and the link between turnover and the range-based volatility

Cited by 20 publications

References 52 publications

Derivatives Trading and the Volume-Volatility Link in the Indian Stock Market

Derivatives Trading and the Volume-Volatility Link in the Indian Stock Market

Investors' trading behaviour and stock market volatility during crisis periods: A dual long‐memory model for the Korean Stock Exchange

Range Volatility: A Review of Models and Empirical Studies

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