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16
The price variability-volume relationship on speculative markets
- Econometrica
, 1983
"... JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JS ..."
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Cited by 212 (6 self)
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JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org. The Econometric Society is collaborating with JSTOR to digitize, preserve and extend access to Econometrica.
A Nonparametric Copula Based Test for Conditional Independence with Applications to Granger Causality *
, 2009
"... This paper proposes a new nonparametric test for conditional independence, which is based on the comparison of Bernstein copula densities using the Hellinger distance. The test is easy to implement because it does not involve a weighting function in the test statistic, and it can be applied in gener ..."
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Cited by 9 (3 self)
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This paper proposes a new nonparametric test for conditional independence, which is based on the comparison of Bernstein copula densities using the Hellinger distance. The test is easy to implement because it does not involve a weighting function in the test statistic, and it can be applied in general settings since there is no restriction on the dimension of the data. In fact, to apply the test, only a bandwidth is needed for the nonparametric copula. We prove that the test statistic is asymptotically pivotal under the null hypothesis, establish local power properties, and motivate the validity of the bootstrap technique that we use in finite sample settings. A simulation study illustrates the good size and power properties of the test. We illustrate the empirical relevance of our test by focusing on Granger causality using financial time series data to test for nonlinear leverage versus volatility feedback effects and to test for causality between stock returns and trading volume. In a third application, we investigate Granger causality between macroeconomic variables.
Autoregressive conditional heteroscedasticity (ARCH) models: a review
- QUALITY TECHNOLOGY AND QUANTITATIVE MANAGEMENT
, 2004
"... Autoregressive Conditional Heteroscedasticity (ARCH) models have successfully been employed in order to predict asset return volatility. Predicting volatility is of great importance in pricing financial derivatives, selecting portfolios, measuring and managing investment risk more accurately. In t ..."
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Cited by 6 (1 self)
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Autoregressive Conditional Heteroscedasticity (ARCH) models have successfully been employed in order to predict asset return volatility. Predicting volatility is of great importance in pricing financial derivatives, selecting portfolios, measuring and managing investment risk more accurately. In this paper, a number of univariate and multivariate ARCH models, their estimating methods and the characteristics of financial time series, which are captured by volatility models, are presented. The number of possible conditional volatility formulations is vast. Therefore, a systematic presentation of the models that have been considered in the ARCH literature can be useful in guiding one’s choice of a model for exploiting future volatility, with applications in financial markets.
Trading volume and the number of trades: a comparative study using high frequency data.” Working paper
, 2007
"... Trading volume and the number of trades are both used as proxies for market activity, with disagreement as to which is the better proxy for market activity. This paper investigates this issue using high frequency data for Cisco and Intel in 1997. A number of econometric methods are used, including G ..."
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Cited by 2 (0 self)
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Trading volume and the number of trades are both used as proxies for market activity, with disagreement as to which is the better proxy for market activity. This paper investigates this issue using high frequency data for Cisco and Intel in 1997. A number of econometric methods are used, including GARCH augmented with lagged trading volume and number of trades, tests based on moment restrictions, regression analysis of volatility on volume and trades, normality of returns when standardized by volume and number of trades, and Correlation analysis using volatility generated from GARCH and realized volatility. Our results show that the number of trades is the better proxy for market activity.
An analysis of the variance and distribution of commodity price-changes
- Australian Journal of Management
, 1979
"... A method of jointly estimating the time-dependent variance of daily commodity price changes and their distribution is presented. The data are copper spot prices (1966-74) and sugar futures prices (1961-73), for London contracts. Much of the leptokurtosis observed in the price chanqe distributions is ..."
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A method of jointly estimating the time-dependent variance of daily commodity price changes and their distribution is presented. The data are copper spot prices (1966-74) and sugar futures prices (1961-73), for London contracts. Much of the leptokurtosis observed in the price chanqe distributions is shown to result from the mixinq of non-normal distributions whose variances differ substantially. There are important consequences for conventional autocorrelation tests, which falsely assume a constant variance. The usefulness of the logarithmic transformation of prices is assessed statisticall ~ and it is found that the transformation does help to equalise the variance of price changes. Keywords:
The empirical investigation of relationship between return, volume, and volatility dynamics in Indian stock market
- Eurasian Journal of Business and Economics
, 2009
"... Abstract This paper examines the empirical relationship between return, volume and volatility dynamics of stock market by using daily data of the Sensitive Index (SENSEX) during the period from October 1996 to March 2006. The empirical analysis provides evidence of positive and significant correlat ..."
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Abstract This paper examines the empirical relationship between return, volume and volatility dynamics of stock market by using daily data of the Sensitive Index (SENSEX) during the period from October 1996 to March 2006. The empirical analysis provides evidence of positive and significant correlation between volume and return volatility that is indicative of the both mixture of distribution and sequential arrival hypothesis of information flow. Causality from volatility to volume can be seen as some evidence that new information arrival might follow a sequential rather than a simultaneous process. In addition, GARCH (1,1) documents the small declines in persistence of variance over time if one includes trading volume as a proxy for information arrivals in the equation of conditional volatility and ARCH and GARCH effects remain significant, which highlights the inefficiency in the market. This finding supports the proposition that volume provides information on the precision and dispersion of information signals, rather than serving as a proxy for the information signal itself.
INVESTIGATING CAUSAL RELATIONS BETWEEN PRICE CHANGES AND TRADING VOLUME CHANGES IN THE TURKISH MARKET
"... ABSTRACT: This empirical investigation examines the causal relations between daily price changes and trading volume changes on the nascent stock exchange of Istanbul, Turkey. The most recent 40-month period from January 2003 through April 2006 is the focus of this study. The long held view that risi ..."
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ABSTRACT: This empirical investigation examines the causal relations between daily price changes and trading volume changes on the nascent stock exchange of Istanbul, Turkey. The most recent 40-month period from January 2003 through April 2006 is the focus of this study. The long held view that rising markets tend to be accompanied by rising volume and declining markets tend to be accompanied by falling volume is robustly supported by the evidence uncovered for the Istanbul Stock Exchange. Moreover, the evidence strongly indicates that the volume – return relation is asymmetric, depending on the direction of the underlying market. The findings of this study also support the notion that it takes trading volume to make the market index move. The tests of the Granger causality between daily index returns and daily volume changes provide an overwhelming evidence of a bi-directional feedback.
Essays on Bayesian Analysis of Financial Economics
, 2009
"... This dissertation consists of three essays with each essay forming a chapter. The regression models in these three chapters are different but share the same feature: the error terms of the models all follow ARMA-GARCH error processes generated either from normal or exponential power distributions. I ..."
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This dissertation consists of three essays with each essay forming a chapter. The regression models in these three chapters are different but share the same feature: the error terms of the models all follow ARMA-GARCH error processes generated either from normal or exponential power distributions. In the first chapter I present a spot asset pricing model that is known as the CKLS model. Two CKLS models are compared. In one model the ARMA-GARCH error process is generated by the exponential power distribution while in the other model the error process is generated by the normal distribution. Using monthly U.S. federal funds rate I estimate the parameters of the CKLS models. From the predictive densities I obtain the distributions of the mean squared errors of forecast (MSEF) and the predictive deviance information criterion (PDIC). In addition I use the Bayes factor and the deviance information criterion (DIC). Markov Chain Monte Carlo (MCMC) algorithms, which are stochastic numerical integration methods, are used. I find that in general the CKLS model with the error term generated by the exponential power distribution is chosen over the model with the normal error term.
International Business and Finance
"... Abstract: This paper studies the effect of bank manager behavior and investor behavior on market value of Islamic and conventional banks in the Middle East and North Africa region. Firstly, our analysis denoted the positive effect of discretionary behavior of manager on both types of banks on share ..."
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Abstract: This paper studies the effect of bank manager behavior and investor behavior on market value of Islamic and conventional banks in the Middle East and North Africa region. Firstly, our analysis denoted the positive effect of discretionary behavior of manager on both types of banks on share prices since discretionary behavior transmits to investor a positive signal of future earnings' prospects. Also, we find that the conventional bank stock prices response is very high to negative signal compared with positive signal. This result is explained by prospect theory and loss aversion bias which specified that individuals are more sensitive to losses than gains of same magnitude. In particular, we discover that the negative effect of non-discretionary behavior is much lower on Islamic bank value since investors give more confidence to Islamic bank because they are motivated by the idea that Islamic banks are safer than conventional banks. Secondly, the results show that investor sentiment affects significantly both bank market prices. Thus, both Islamic and conventional banks' market value depends similarly on manager and investor behavior. The implication of this paper is that Islamic bank concentrations reveal a positive effect on their price values because of the recently increased investments in Islamic banks. PUBLIC INTEREST STATEMENT The stock market value depends on various factors. This study investigates the effect of bank manager behavior and investor behavior on market value of Islamic and conventional banks in eight countries of the Middle East and North Africa region. The empirical findings of this paper show that the behavior of manager affects significantly the banks value. Indeed, discretionary behavior of manager transmits to investor a positive signal of future earnings' prospects. Moreover, conventional market bank value response is very high to negative signal compared with positive signal. Our results also indicate that the effect of investor sentiment on both bank market prices is also significant. Our paper highlights either an important implication that the limited number of Islamic banks presents a positive effect on Islamic market bank value.
Stock Market Autoregressive Dynamics: A Multinational Comparative Study with Quantile Regression
"... We study the nonlinear autoregressive dynamics of stock index returns in seven major advanced economies (G7) and China. The quantile autoregression model (QAR) enables us to investigate the autocorrelation across the whole spectrum of return distribution, which provides more insightful conditional ..."
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We study the nonlinear autoregressive dynamics of stock index returns in seven major advanced economies (G7) and China. The quantile autoregression model (QAR) enables us to investigate the autocorrelation across the whole spectrum of return distribution, which provides more insightful conditional information on multinational stock market dynamics than conventional time series models. The relation between index return and contemporaneous trading volume is also investigated. While prior studies have mixed results on stock market autocorrelations, we find that the dynamics is usually state dependent. The results for G7 stock markets exhibit conspicuous similarities, but they are in manifest contrast to the findings on Chinese stock markets.
