Stock Return, Volume and Volatility in the EGARCH model
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I use EGARCH model to study the asymmetric impact of negative and positive shocks on stock return volatility. I find the asymmetric effects exist and the impact on volatility of a negative shock is greater than that of a positive shock. Furthermore, I examine the dynamic relationship between returns, volume and volatility of stock index by introducing trading volume as an exogenous variable into the EGARCH model. The results indicate that trading volume contributes some information to the returns processes of stock indexes. However, the persistence of volatility remains even after incorporating lagged volume effects, which are proxies for information flow. Granger causality tests demonstrate stronger evidence of returns causing volume than volume causing returns.
Abstract
I use EGARCH model to study the asymmetric impact of negative and positive shocks on stock return volatility. I find the asymmetric effects exist and the impact on volatility of a negative shock is greater than that of a positive shock. Furthermore, I examine the dynamic relationship between returns, volume and volatility of stock index by introducing trading volume as an exogenous variable into the EGARCH model. The results indicate that trading volume contributes some information to the returns processes of stock indexes. However, the persistence of volatility remains even after incorporating lagged volume effects, which are proxies for information flow. Granger causality tests demonstrate stronger evidence of returns causing volume than volume causing returns.
참고문헌 (14)
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