IDEAS home Printed from https://ideas.repec.org/a/sae/vision/v20y2016i2p101-110.html
   My bibliography  Save this article

Sequential Information Arrival Hypothesis: More Evidence from the Indian Derivatives Market

Author

Listed:
  • Sangram K. Jena

Abstract

The study attempts to gather additional evidence on the sequential information arrival hypothesis by examining the dynamic relationship between the trading volume and the volatility of CNX Nifty index futures traded on the National Stock Exchange of India. The documented result using a linear Granger causality model shows a unidirectional causality from volatility to trading volume, thus rejecting the theory of sequential arrival of information in Nifty index futures. Further, under a non-linear GARCH framework of analysis, it is reinforced that a lagged trading volume has no explanatory power of current conditional volatility, even in the presence of market depth surrogated by open interest in the Nifty futures market. Consequently, given the trading volume, the possibility of forecasting the price variability of Nifty futures is rejected.

Suggested Citation

  • Sangram K. Jena, 2016. "Sequential Information Arrival Hypothesis: More Evidence from the Indian Derivatives Market," Vision, , vol. 20(2), pages 101-110, June.
    • Handle: RePEc:sae:vision:v:20:y:2016:i:2:p:101-110
    DOI: 10.1177/0972262916637259
    as

    Download full text from publisher

    File URL: https://journals.sagepub.com/doi/10.1177/0972262916637259
    Download Restriction: no
    File URL: https://libkey.io/10.1177/0972262916637259?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Grammatikos, Theoharry & Saunders, Anthony, 1986. "Futures Price Variability: A Test of Maturity and Volume Effects," The Journal of Business, University of Chicago Press, vol. 59(2), pages 319-330, April.
    2. Elena Kalotychou & Sotiris Staikouras, 2006. "Volatility and trading activity in Short Sterling futures," Applied Economics, Taylor & Francis Journals, vol. 38(9), pages 997-1005.
    3. Mougoué, Mbodja & Aggarwal, Raj, 2011. "Trading volume and exchange rate volatility: Evidence for the sequential arrival of information hypothesis," Journal of Banking & Finance, Elsevier, vol. 35(10), pages 2690-2703, October.
    4. 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.
    5. Smirlock, Michael & Starks, Laura, 1988. "An empirical analysis of the stock price-volume relationship," Journal of Banking & Finance, Elsevier, vol. 12(1), pages 31-41, March.
    6. Clark, Peter K, 1973. "A Subordinated Stochastic Process Model with Finite Variance for Speculative Prices," Econometrica, Econometric Society, vol. 41(1), pages 135-155, January.
    7. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-438, July.
    8. Kyle, Albert S, 1985. "Continuous Auctions and Insider Trading," Econometrica, Econometric Society, vol. 53(6), pages 1315-1335, November.
    9. Kawaller, Ira G & Koch, Paul D & Koch, Timothy W, 1987. "The Temporal Price Relationship between S&P 500 Futures and the S and P 500 Index," Journal of Finance, American Finance Association, vol. 42(5), pages 1309-1329, December.
    10. 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.
    11. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
    12. Tauchen, George E & Pitts, Mark, 1983. "The Price Variability-Volume Relationship on Speculative Markets," Econometrica, Econometric Society, vol. 51(2), pages 485-505, March.
    13. 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.
    14. 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(1), pages 109-126, March.
    15. Akgiray, Vedat, et al, 1991. "Conditional Dependence in Precious Metal Prices," The Financial Review, Eastern Finance Association, vol. 26(3), pages 367-386, August.
    16. Jennings, Robert H & Starks, Laura T & Fellingham, John C, 1981. "An Equilibrium Model of Asset Trading with Sequential Information Arrival," Journal of Finance, American Finance Association, vol. 36(1), pages 143-161, March.
    17. Ali Kutan & Tansu Aksoy, 2003. "Public Information Arrival and the Fisher Effect in Emerging Markets: Evidence from Stock and Bond Markets in Turkey," Journal of Financial Services Research, Springer;Western Finance Association, vol. 23(3), pages 225-239, June.
    18. Bradford Cornell, 1981. "The relationship between volume and price variability in futures markets," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 1(3), pages 303-316, September.
    19. Bollerslev, Tim, 1987. "A Conditionally Heteroskedastic Time Series Model for Speculative Prices and Rates of Return," The Review of Economics and Statistics, MIT Press, vol. 69(3), pages 542-547, August.
    20. Mohammad Majand & Kenneth Yung, 1991. "A GARCH examination of the relationship between volume and price variability in futures markets," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 11(5), pages 613-621, October.
    21. Harris, Lawrence, 1987. "Transaction Data Tests of the Mixture of Distributions Hypothesis," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 22(2), pages 127-141, June.
    22. Gallant, A Ronald & Rossi, Peter E & Tauchen, George, 1992. "Stock Prices and Volume," Review of Financial Studies, Society for Financial Studies, vol. 5(2), pages 199-242.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jena, Sangram Keshari & Tiwari, Aviral Kumar & Roubaud, David & Shahbaz, Muhammad, 2018. "Index futures volatility and trading activity: Measuring causality at a multiple horizon," Finance Research Letters, Elsevier, vol. 24(C), pages 247-255.
    2. Iwatsubo, Kentaro & Watkins, Clinton & Xu, Tao, 2018. "Intraday seasonality in efficiency, liquidity, volatility and volume: Platinum and gold futures in Tokyo and New York," Journal of Commodity Markets, Elsevier, vol. 11(C), pages 59-71.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Chuang, Wen-I & Liu, Hsiang-Hsi & Susmel, Rauli, 2012. "The bivariate GARCH approach to investigating the relation between stock returns, trading volume, and return volatility," Global Finance Journal, Elsevier, vol. 23(1), pages 1-15.
    2. Yamani, Ehab, 2023. "Return–volume nexus in financial markets: A survey of research," Research in International Business and Finance, Elsevier, vol. 65(C).
    3. David McMillan & Alan Speight, 2002. "Return-volume dynamics in UK futures," Applied Financial Economics, Taylor & Francis Journals, vol. 12(10), pages 707-713.
    4. Sarika Mahajan & Balwinder Singh, 2008. "An Empirical Analysis of Stock Price-Volume Relationship in Indian Stock Market," Vision, , vol. 12(3), pages 1-13, July.
    5. Doojin RYU & Hyein SHIM, 2017. "Intraday Dynamics of Asset Returns, Trading Activities, and Implied Volatilities: A Trivariate GARCH Framework," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(2), pages 45-61, June.
    6. Alizadeh, Amir H., 2013. "Trading volume and volatility in the shipping forward freight market," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 49(1), pages 250-265.
    7. Chen, Gong-meng & Firth, Michael & Rui, Oliver M, 2001. "The Dynamic Relation between Stock Returns, Trading Volume, and Volatility," The Financial Review, Eastern Finance Association, vol. 36(3), pages 153-173, August.
    8. Holmes, Phil & Rougier, Jonathan, 2005. "Trading volume and contract rollover in futures contracts," Journal of Empirical Finance, Elsevier, vol. 12(2), pages 317-338, March.
    9. Alizadeh, Amir H. & Tamvakis, Michael, 2016. "Market conditions, trader types and price–volume relation in energy futures markets," Energy Economics, Elsevier, vol. 56(C), pages 134-149.
    10. Saswat Patra & Malay Bhattacharyya, 2021. "Does volume really matter? A risk management perspective using cross‐country evidence," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 26(1), pages 118-135, January.
    11. Shen, Dehua & Li, Xiao & Zhang, Wei, 2018. "Baidu news information flow and return volatility: Evidence for the Sequential Information Arrival Hypothesis," Economic Modelling, Elsevier, vol. 69(C), pages 127-133.
    12. Elena Kalotychou & Sotiris Staikouras, 2006. "Volatility and trading activity in Short Sterling futures," Applied Economics, Taylor & Francis Journals, vol. 38(9), pages 997-1005.
    13. Kao, Yu-Sheng & Chuang, Hwei-Lin & Ku, Yu-Cheng, 2020. "The empirical linkages among market returns, return volatility, and trading volume: Evidence from the S&P 500 VIX Futures," The North American Journal of Economics and Finance, Elsevier, vol. 54(C).
    14. Koubaa, Yosra & Slim, Skander, 2019. "The relationship between trading activity and stock market volatility: Does the volume threshold matter?," Economic Modelling, Elsevier, vol. 82(C), pages 168-184.
    15. Kao, Yu-Sheng & Zhao, Kai & Chuang, Hwei-Lin & Ku, Yu-Cheng, 2024. "The asymmetric relationships between the Bitcoin futures’ return, volatility, and trading volume," International Review of Economics & Finance, Elsevier, vol. 89(PA), pages 524-542.
    16. Do, Hung Xuan & Brooks, Robert & Treepongkaruna, Sirimon & Wu, Eliza, 2014. "How does trading volume affect financial return distributions?," International Review of Financial Analysis, Elsevier, vol. 35(C), pages 190-206.
    17. Loredana Ureche-Rangau & Quiterie de Rorthays, 2009. "More on the volatility-trading volume relationship in emerging markets: The Chinese stock market," Journal of Applied Statistics, Taylor & Francis Journals, vol. 36(7), pages 779-799.
    18. Kausik Chaudhuri & Alok Kumar, 2015. "A Markov-Switching Model for Indian Stock Price and Volume," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 14(3), pages 239-257, December.
    19. Alex Frino & Elvis Jarnecic & Hui Zheng, 2010. "Activity in futures: does underlying market size relate to futures trading volume?," Review of Quantitative Finance and Accounting, Springer, vol. 34(3), pages 313-325, April.
    20. Cook, Steve & Watson, Duncan, 2017. "Revisiting the returns–volume relationship: Time variation, alternative measures and the financial crisis," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 470(C), pages 228-235.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sae:vision:v:20:y:2016:i:2:p:101-110. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: SAGE Publications (email available below). General contact details of provider: .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.