The Relationship between Volatility and Trading Volume in the Chinese Stock Market: A Volatility Decomposition Perspective

Tianyi Wang () and Zhuo Huang ()

Annals of Economics and Finance, 2012, vol. 13, issue 1, 211-236

Abstract: We use heterogeneous autoregressive (HAR) model with high-frequency data of Hu-Shen 300 index to investigate the volatility-volume relationship via the volatility decomposition approach. Although we find that the continuous component of daily volatility is positively correlated with trading volume, the jump component reveals a significant and robust negative relation with volume. This result suggests that the jump component contains some "public information" while the continuous components are more likely driven by "private information". Discussion of the intertemporal relationship supports the information-driven trading hypothesis. Lagged realized skewness only significantly affects the continuous component.

Keywords: High frequency; Price jump; Trading volume (search for similar items in EconPapers)
JEL-codes: G10 G12 G14 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (16)

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Persistent link: https://EconPapers.repec.org/RePEc:cuf:journl:y:2012:v:13:i:1:n:2

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