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Index futures volatility and trading activity: Measuring causality at a multiple horizon

Sangram Keshari Jena, Aviral Kumar Tiwari, David Roubaud and Muhammad Shahbaz ()

Finance Research Letters, 2018, vol. 24, issue C, 247-255

Abstract: Copeland (1976) and Shalen (1993) state that the causal relationship between trading activity variables, such as volume, open interest and volatility, the three most important factors for traders and portfolio managers, extends beyond one day. However, the literature on causality thus far concerns a one-day horizon. In this study, we provide a more powerful causality test by measuring the strength of the causal relationship over a multiple horizon. The robustness of the results is analysed by splitting the sample into two period pre and post 2008 crisis. Our findings may impact the designing of trading strategies.

Keywords: Trading activity; Multiple-horizon Granger causality; Open interest (search for similar items in EconPapers)
JEL-codes: C12 C32 G11 G12 (search for similar items in EconPapers)
Date: 2018
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