Trading volume, time-varying conditional volatility, and asymmetric volatility spillover in the Saudi stock market
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.
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.:
- Giampiero Gallo & Barbara Pacini, 2000. "The effects of trading activity on market volatility," The European Journal of Finance, Taylor & Francis Journals, vol. 6(2), pages 163-175.
- Conrad, Jennifer & Kaul, Gautam & Nimalendran, M., 1991. "Components of short-horizon individual security returns," Journal of Financial Economics, Elsevier, vol. 29(2), pages 365-384, October.
- Epps, Thomas W & Epps, Mary Lee, 1976. "The Stochastic Dependence of Security Price Changes and Transaction Volumes: Implications for the Mixture-of-Distributions Hypothesis," Econometrica, Econometric Society, vol. 44(2), pages 305-321, March.
- Karpoff, Jonathan M., 1987. "The Relation between Price Changes and Trading Volume: A Survey," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 22(01), pages 109-126, March.
- Pyun, Chong Soo & Lee, Sa Young & Nam, Kiseok, 2000. "Volatility and information flows in emerging equity market: A case of the Korean Stock Exchange," International Review of Financial Analysis, Elsevier, vol. 9(4), pages 405-420.
- Bohl, Martin T. & Henke, Harald, 2003. "Trading volume and stock market volatility: The Polish case," International Review of Financial Analysis, Elsevier, vol. 12(5), pages 513-525.
- AfDB AfDB, . "AfDB Group Annual Report 2004," Annual Report, African Development Bank, number 60 edited by Koua Louis Kouakou.
- Hamao, Yasushi & Masulis, Ronald W & Ng, Victor, 1990. "Correlations in Price Changes and Volatility across International Stock Markets," Review of Financial Studies, Society for Financial Studies, vol. 3(2), pages 281-307.
- Bollerslev, Tim, 1986.
"Generalized autoregressive conditional heteroskedasticity,"
Journal of Econometrics,
Elsevier, vol. 31(3), pages 307-327, April.
- Tim Bollerslev, 1986. "Generalized autoregressive conditional heteroskedasticity," EERI Research Paper Series EERI RP 1986/01, Economics and Econometrics Research Institute (EERI), Brussels.
- Lamoureux, Christopher G & Lastrapes, William D, 1990. " Heteroskedasticity in Stock Return Data: Volume versus GARCH Effects," Journal of Finance, American Finance Association, vol. 45(1), pages 221-229, March.
- Mario Reyes, 2001. "Asymmetric volatility spillover in the Tokyo stock exchange," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 25(2), pages 206-213, June.
- Darrat, Ali F. & Rahman, Shafiqur & Zhong, Maosen, 2003. "Intraday trading volume and return volatility of the DJIA stocks: A note," Journal of Banking & Finance, Elsevier, vol. 27(10), pages 2035-2043, October.
- Conrad, Jennifer & Gultekin, Mustafa N & Kaul, Gautam, 1991. "Asymmetric Predictability of Conditional Variances," Review of Financial Studies, Society for Financial Studies, vol. 4(4), pages 597-622.
- Harris, Lawrence, 1987. "Transaction Data Tests of the Mixture of Distributions Hypothesis," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 22(02), pages 127-141, June.
- Copeland, Thomas E, 1976. "A Model of Asset Trading under the Assumption of Sequential Information Arrival," Journal of Finance, American Finance Association, vol. 31(4), pages 1149-1168, September.
- Andersen, Torben G, 1996. " Return Volatility and Trading Volume: An Information Flow Interpretation of Stochastic Volatility," Journal of Finance, American Finance Association, vol. 51(1), pages 169-204, March. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:eee:mulfin:v:19:y:2009:i:2:p:139-159. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)
If references are entirely missing, you can add them using this form.