NDLI: Intraday jumps and trading volume: a nonlinear Tobit specification

Content Provider	Springer Nature Link
Author	Jawadi, Fredj Louhichi, Waël Idi Cheffou, Abdoulkarim Randrianarivony, Rivo
Copyright Year	2015
Abstract	This paper investigates the relationship between trading volume and volatility for four international stock markets (US: S&P500, UK: FTSE100, France: CAC40 and Germany: DAX30) in a context of global financial crisis. Unlike previous related studies, we use intraday data and apply a nonlinear econometric model to assess this relationship. In particular, we first break down intraday realized volatility into its continuous and jump components using the non-parametric approach developed by Barndorff-Nielsen and Shephard (J Financ Econom 4:1–30, 2006). Second, we investigate the volume–volatility relationship and test whether it varies according to volatility components (jumps and continuous component). While Giot et al. (J Empir Finance 17:168–175, 2010), among others, investigated the volume–volatility relationship in a linear context, our study contributes by estimating different nonlinear specifications (threshold model, nonlinear Tobit model) that enable us to capture further asymmetry and time-variation to better apprehend the effect of trading volume on realized volatility. Accordingly, our study yields two interesting findings. On the one hand, as expected there is a significant and positive relationship between trading volume and realized volatility, as well as with its components, confirming the importance of trading volume as a key to characterizing volatility. On the other hand, we show that this relationship exhibits asymmetry and nonlinearity, and that threshold models are more appropriate than linear model to characterize the volume volatility relationship.
Starting Page	1167
Ending Page	1186
Page Count	20
File Format	PDF
ISSN	0924865X
Journal	Review of Quantitative Finance and Accounting
Volume Number	47
Issue Number	4
e-ISSN	15737179
Language	English
Publisher	Springer US
Publisher Date	2015-09-08
Publisher Place	New York
Access Restriction	One Nation One Subscription (ONOS)
Subject Keyword	Intraday data Realized volatility Jumps Trading volume Nonlinearity Corporate Finance Accounting/Auditing Econometrics Operation Research/Decision Theory
Content Type	Text
Resource Type	Article
Subject	Finance Accounting

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