Modeling of returns and trading volume by regime switching copulas
Henryk Gurgul (),
Machno Artur () and
Roland Mestel ()
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Machno Artur: AGH University of Science and Technology in Cracow, Department of Applications of Mathematics in Economics
Managerial Economics, 2013, vol. 13, 45-64
The structure of links between realized volatility and trading volume can be reflected by regime switching copulas. The estimation by means of copula based regime switching models delivered results concerning the interdependencies between realized return volatility and trading volume of selected companies listed in ATX. A copula in the first regime was chosen as an asymmetric copula with positive lower and upper tail dependencies. Conversely Gaussian copula in the second regime is a symmetric copula and variables linked with it are tail independent. For all analyzed stocks the probability of being at the first regime appeared to be vitally greater than being at the second regime. This result suggest that there is considerable dependence between realized volatility and daily volume in extreme values. The results suggest that interdependencies between realized volatility and trading volume do not probably depend on the size but rather on the branch of a company.
Keywords: stock return volatility; trading volume; interdependency; regime switching copulas (search for similar items in EconPapers)
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