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Trading volume, time-varying conditional volatility, and asymmetric volatility spillover in the Saudi stock market

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  • Alsubaie, Abdullah
  • Najand, Mohammad
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    Abstract

    Despite the well known importance of volatility-volume relationship, there is a paucity of research on this topic in emerging markets. We attempt to partially fill this gap by investigating volatility-volume relationship in the most important exchange market in the Middle East. We test the effect of trading volume on the persistence of the time-varying conditional volatility of returns in the Saudi stock market. Overall our results support the mixture of distribution hypothesis at the firm level. We also use two different proxies for information arrival, intra-day volatility, and overnight indicators. We find that these are good proxies for information and are important as contemporaneous volume in explaining conditional volatility. We also test for the volatility spillover direction between large- and small-cap portfolios. Our results show that the spillover effect is larger and statistically significant from large to small companies.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Multinational Financial Management.

    Volume (Year): 19 (2009)
    Issue (Month): 2 (April)
    Pages: 139-159

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    Handle: RePEc:eee:mulfin:v:19:y:2009:i:2:p:139-159

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    Web page: http://www.elsevier.com/locate/mulfin

    Related research

    Keywords: Saudi stock market Trading volume Time-varying conditional volatility Mixture of distribution hypothesis;

    References

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    Cited by:
    1. Eli Bouri & Andre Eid & Imad Kachacha, 2014. "The Dynamic Behaviour and Determinants of Linkages among Middle Eastern and North African Stock Exchanges," Economic Issues Journal Articles, Economic Issues, vol. 19(1), pages 1-22, March.
    2. Rafaqet Ali & Muhammad Afzal, 2012. "Impact of global financial crisis on stock markets: Evidence from Pakistan and India," E3 Journal of Business Management and Economics., E3 Journals, vol. 3(7), pages 275-282.
    3. Louhichi, Waƫl, 2011. "What drives the volume-volatility relationship on Euronext Paris?," International Review of Financial Analysis, Elsevier, vol. 20(4), pages 200-206, August.
    4. Farag, Hisham & Cressy, Robert, 2011. "Do regulatory policies affect the flow of information in emerging markets?," Research in International Business and Finance, Elsevier, vol. 25(3), pages 238-254, September.

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