Can Speculative Trading Explain the Volume-Volatility Relation?
- 1 October 1995
- journal article
- research article
- Published by JSTOR in Journal of Business & Economic Statistics
- Vol. 13 (4) , 379-396
- https://doi.org/10.2307/1392384
Abstract
We derive a speculative trading model with endogenous informed trading that yields a conditionally heteroscedastic time series for trading volume and the squared price changes. We use half-hourly price-change and volume data for IBM during 1988 to test the model and estimate the structural parameters using the simulated method-of-moments estimation procedure. Although the model seems to do a reasonable job fitting the unconditional moments of the volume and the squared price change processes, it fares less well in fitting the relation between current trading volume and lags of trading volume and squared volume's (and its lag's) relation to squared price changes.Keywords
This publication has 2 references indexed in Scilit:
- Divide and Conquer: A Theory of Intraday and Day-of-the-Week Mean EffectsThe Review of Financial Studies, 1989
- A Theory of Intraday Patterns: Volume and Price VariabilityThe Review of Financial Studies, 1988