IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Efficiently ARMA-GARCH estimated trading volume characteristics in thinly traded markets

  • P. B. Solibakke
Registered author(s):

    ARMA-GARCH lag specification is employed to fit a model exhibiting nonsynchronous trading and volatility clustering for the Norwegian thinly traded equity market. In particular, characteristics of the conditional mean and conditional volatility inhibited in thinly traded equity markets are investigated. Trading volume is employed as a proxy measure for trading frequency. Low to no trading volume induces thin trading and non-trading effects while a relative higher trading frequency induces continuous trading. The main objective is to investigate trading frequency differences in serial correlation and cross-autocorrelation in the mean equation and volatility clustering in the volatility equation as well as any symptoms of data dependencies in the model residuals, which imply ARMA-GARCH model misspecification. BIC efficient ARMA-GARCH lag specifications are employed for the conditional mean and volatility and relevant mean and volatility parameter measures introduced that are well known from the changing volatility literature. The empirical results report consistent mean and volatility patterns over the increasing trading frequency series. Nonsynchronous trading and non-trading effects show a consistent pattern in serial correlation and cross-autocorrelation for the conditional mean and the latent volatility exhibits a consistent pattern in past shocks, past conditional volatility, persistence and weight to long-run average volatility. In contrast to the more relatively frequently traded asset series the most thinly traded series report insignificant asymmetric volatility. Moreover, for the most thinly traded series, specification tests suggest data dependence, which seems to be prolonged into the equal-weighted index series. Hence, due to serial correlation and data dependence in the model residuals the ARMA-GARCH lag specifications seem only appropriate for relatively frequently traded return series.

    If you experience problems downloading a file, check if you have the proper application to view it first. 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.

    File URL: http://www.tandfonline.com/doi/abs/10.1080/09603100010029234
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

    Article provided by Taylor & Francis Journals in its journal Applied Financial Economics.

    Volume (Year): 11 (2001)
    Issue (Month): 5 ()
    Pages: 539-556

    as
    in new window

    Handle: RePEc:taf:apfiec:v:11:y:2001:i:5:p:539-556
    Contact details of provider: Web page: http://www.tandfonline.com/RAFE20

    Order Information: Web: http://www.tandfonline.com/pricing/journal/RAFE20

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:taf:apfiec:v:11:y:2001:i:5:p:539-556. 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: (Michael McNulty)

    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 references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link 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 profile, as there may be some citations waiting for confirmation.

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

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.