Volume versus GARCH effects reconsidered: an application to the Spanish Government Bond Futures Market

Jose Montalvo

Applied Financial Economics, 1999, vol. 9, issue 5, 469-475

Abstract: The mixture distribution model is one of the benchmarks for modelling the relationship between volume and return. A basic variable in that theoretical construction is the number of intraday equilibria, which is empirically unobservable. This paper re-examines the finding in Lamoureux and Lastrapes (Journal of Finance, 45, 1990) using alternative proxies for the number of intraday equilibria, which are included in the conditional variance equation of a GARCH model. The results show, using data of the Spanish Government Bond Futures Market for the 1992-94 period, that the number of transaction clusters and the average volume have a positive effect on conditional volatility.

Date: 1999
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DOI: 10.1080/096031099332122

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