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New evidence on the relation between return volatility and trading volume
Thomas C. Chiang1; Zhuo Qiao2; Wing-Keung Wong3
2010-07-15
Source PublicationJournal of Forecasting
ISSN1099-131X
Issue29Pages:502–515
Abstract

In the empirical literature, it has been shown that there exists both linear and non-linear bi-directional causality between trading volumes and return volatility (measured by the square of daily return). We re-examine this claim by using realized volatility as an estimator of the unobserved volatility, adopting a stationary de-trended trading volume, and applying a more recent data sample with robustness tests over time. Our linear Granger causality test shows that there is no causal linear relation running from volume to volatility, but there exists an ambiguous causality for the reverse direction. In contrast, we fi nd strong bi-directional non-linear Granger causality between these two variables. On the basis of the non-linear forecasting modeling technique, this study provides strong evidence to support the sequential information hypothesis and demonstrates that it is useful to use lagged values of trading volume to predict return volatility.

KeywordReturn Volatility High Frequency Data Trading Volume Non-linear Granger Causality
DOIhttps://doi.org/10.1002/for.1151
Indexed BySSCI
Language英语
WOS Research AreaBusiness & Economics
WOS SubjectEconomics ; Management
WOS IDWOS:000280445400006
PublisherWILEY-BLACKWELL, 111 RIVER ST, HOBOKEN 07030-5774, NJ USA
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Citation statistics
Cited Times [WOS]:23   [WOS Record]     [Related Records in WOS]
Document TypeJournal article
CollectionFaculty of Business Administration
DEPARTMENT OF FINANCE AND BUSINESS ECONOMICS
Corresponding AuthorThomas C. Chiang
Affiliation1.Department of Finance, Drexel University, Philadelphia, PA, USA
2.Faculty of Business Administration, University of Macau, Macau
3.Department of Economics, Hong Kong Baptist University, Hong Kong
Recommended Citation
GB/T 7714
Thomas C. Chiang,Zhuo Qiao,Wing-Keung Wong. New evidence on the relation between return volatility and trading volume[J]. Journal of Forecasting,2010(29):502–515.
APA Thomas C. Chiang,Zhuo Qiao,&Wing-Keung Wong.(2010).New evidence on the relation between return volatility and trading volume.Journal of Forecasting(29),502–515.
MLA Thomas C. Chiang,et al."New evidence on the relation between return volatility and trading volume".Journal of Forecasting .29(2010):502–515.
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