Asymmetric volume volatility causality in dual listing H-shares

Malay K. Dey () and Chaoyan Wang ()
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Malay K. Dey: FINQ
Chaoyan Wang: University of Nottingham

Journal of Asset Management, 2022, vol. 23, issue 5, No 5, 419-428

Abstract: Abstract Using Granger causality test, we investigate the lead-lag relation between volume and volatility in 14 Chinese ADRs and those of their underlying H-shares. We consider volume as denoting liquidity. We model and forecast volatility using a TARCH model and find evidence of leverage effect and persistence in volatility among the ADRs and H-shares. We document significant but asymmetric bidirectional Granger causality between volume and volatility in ADRs and their underlying H-shares. The asymmetry seems to have declined in recent years, during the latter half of the sample period. We conclude that the relation between liquidity denoted by volume and volatility are time- varying and asymmetric between ADRs and their underlying H-shares.

Keywords: Volume-volatility; Granger causality; TARCH model; ADR (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1057/s41260-022-00275-z

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