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

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 find 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 find 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 signifcant expiration day effects on both the value of shares traded and volatility series.derivatives trading; emerging markets; long-memory; range-based volatility; value of shares traded

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

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 find 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 find 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 signifcant expiration day effects on both the value of shares traded and volatility series.http://deepblue.lib.umich.edu/bitstream/2027.42/64397/1/wp935.pd

The informative role of trading volume in an expanding spot and futures market

This paper investigates the information content of trading volume and its relationship with range based volatility 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 find 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 consistent with the argument that the activity of informed traders is inversely related to volatility when the marketplace has increased liquidity, an increasing number of active investors and high consensus among investors when new information is released. 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 significant expiration day effects on both the value of shares traded and volatility series

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

This paper investigates the issue of temporal ordering of the range-based volatility and turnover volume in the Korean market for the period 1995-2005. We examine the dynamics of the two variables and their respective uncertainties using a bivariate dual long-memory model. We distinguish volume trading before the Asia financial crisis from trading after the crisis. We find that the apparent long-memory in the variables is quite resistant to the presence of breaks. However, when we take into account structural breaks the order of integration of the conditional variance series decreases considerably. Moreover, the impact of foreign volume on volatility is negative in the pre-crisis period but turns to positive after the crisis. This result is consistent with the view that foreign purchases tend to lower volatility in emerging markets--especially in the first few years after market liberalization when foreigners are buying into local markets--whereas foreign sales increase volatility. Before the crisis there is no causal effect for domestic volume on volatility whereas in the post-crisis period total and domestic volumes affect volatility positively. The former result is in line with the theoretical underpinnings that predict that trading within domestic investor groups does not affect volatility. The latter result is consistent with the theoretical argument that the positive relation between the two variables is driven by the uninformed general public.Range-based volatility Financial crisis Foreign investors Long-memory Turnover volume

Inflation convergence in the EMU

publisher: Elsevier articletitle: Inflation convergence in the EMU journaltitle: Journal of Empirical Finance articlelink: http://dx.doi.org/10.1016/j.jempfin.2016.07.004 content_type: article copyright: © 2016 The Author(s). Published by Elsevier B.V.publisher: Elsevier articletitle: Inflation convergence in the EMU journaltitle: Journal of Empirical Finance articlelink: http://dx.doi.org/10.1016/j.jempfin.2016.07.004 content_type: article copyright: © 2016 The Author(s). Published by Elsevier B.V

The volume–volatility relationship and the opening of the Korean stock market to foreign investors after the financial turmoil in 1997

Bidirectional feedback, Financial turmoil, Foreign investors, Stock volatility, Trading volume, C22, E31,