Intraday trading activities and volatility in round-the-clock futures markets

Erin H. Kao and Hung-Gay Fung

International Review of Economics & Finance, 2012, vol. 21, issue 1, 195-209

Abstract: In this paper we examine the relationship between intraday return volatility and volume of trading for Japanese yen futures, euro FX futures, and E-mini S&P 500 futures traded on a 24-hour GLOBEX trading system in six time zones. The results support the mixture-of-distribution hypothesis (MDH), which endorses a significant contemporaneous relationship between volume and volatility, and the sequential-arrival-of-information hypothesis (SAIH), which advocates significant lagged volatility–volume relations. The net effect of trading number is positive, supporting the dispersed belief hypothesis, while the net effect of trading imbalance is negative, supporting the asymmetrical information hypothesis. Our results suggest that the four theories of volume–volatility relations are complementary, not competing. In addition, the largest effect of the trading imbalance on volatility is found during American regular trading hours, rather than the home asset market of the futures contracts, thus supporting the trading place bias.

Keywords: Trading number; Trading imbalance; Volatility–volume relationship; Trading place bias; Time zones (search for similar items in EconPapers)
JEL-codes: C32 G12 G14 G15 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:21:y:2012:i:1:p:195-209

DOI: 10.1016/j.iref.2011.06.003

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