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Intraday trading activities and volatility in round-the-clock futures markets

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  • Kao, Erin H.
  • Fung, Hung-Gay

Abstract

In this paper we examine the relationship between intraday return volatility and volume of trading for Japanese yen futures, euro FX futures, and E-mini S&P 500 futures traded on a 24-hour GLOBEX trading system in six time zones. The results support the mixture-of-distribution hypothesis (MDH), which endorses a significant contemporaneous relationship between volume and volatility, and the sequential-arrival-of-information hypothesis (SAIH), which advocates significant lagged volatility–volume relations. The net effect of trading number is positive, supporting the dispersed belief hypothesis, while the net effect of trading imbalance is negative, supporting the asymmetrical information hypothesis. Our results suggest that the four theories of volume–volatility relations are complementary, not competing. In addition, the largest effect of the trading imbalance on volatility is found during American regular trading hours, rather than the home asset market of the futures contracts, thus supporting the trading place bias.

Suggested Citation

  • Kao, Erin H. & Fung, Hung-Gay, 2012. "Intraday trading activities and volatility in round-the-clock futures markets," International Review of Economics & Finance, Elsevier, vol. 21(1), pages 195-209.
  • Handle: RePEc:eee:reveco:v:21:y:2012:i:1:p:195-209
    DOI: 10.1016/j.iref.2011.06.003
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    Cited by:

    1. Koulakiotis, Athanasios & Kartalis, Nikos & Lyroudi, Katerina & Papasyriopoulos, Nicholas, 2012. "Asymmetric and threshold effects on comovements among Germanic cross-listed equities," International Review of Economics & Finance, Elsevier, vol. 24(C), pages 327-342.
    2. repec:spr:chfecr:v:4:y:2016:i:1:d:10.1186_s40589-016-0032-0 is not listed on IDEAS
    3. Peri, Massimo & Vandone, Daniela & Baldi, Lucia, 2014. "Internet, noise trading and commodity futures prices," International Review of Economics & Finance, Elsevier, vol. 33(C), pages 82-89.
    4. Kao, Erin H. & Ho, Tsung-wu & Fung, Hung-Gay, 2015. "Price linkage between the US and Japanese futures across different time zones: An analysis of the minute-by-minute data," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 34(C), pages 321-336.

    More about this item

    Keywords

    Trading number; Trading imbalance; Volatility–volume relationship; Trading place bias; Time zones;

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models

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