Thierry Ané () (University of Reims, IÉSEG School of Management) Loredana Ureche-Rangau () (IÉSEG School of Management)
Abstract
Assuming that the variance of daily price changes and trading volume are both driven by the same latent variable measuring the number of price-relevant information arriving on the market, the Mixture of Distribution Hypothesis (MDH) represents an intuitive and appealing explanation for the empirically observed correlation between volume and volatility of speculative assets. This paper investigates to which extent the temporal dependence of volatility and volume is compatible with a MDH model through a systematic analysis of the long memory properties of power transformations of both series. It is found that the fractional differencing parameter of the volatility series reaches its maximum for a power transformation around and then decreases for other order moments while the differencing parameter of the trading volume remains remarkably unchanged. The volatility process thus exhibits a high degree of intermittence whereas the volume dynamic appears much smoother. The results suggest that volatility and volume may share common short-term movements but that their long-run behavior is fundamentally different.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
Publisher Info
Paper provided by IESEG School of Management in its series Working Papers with number
2004-FIN-02.
Length: 36 pages Date of creation: Jul 2004 Date of revision: Publication status: Published in Journal of International Financial Markets Institutions and Money, July 2008, 18, pp. 216-235 Handle: RePEc:ies:wpaper:f200402
Find related papers by JEL classification: C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Estimation C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation and Testing G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.: