The intraday relationship between volume and volatility in LIFFE futures markets

Owain ap Gwilym, David McMillan and Alan Speight

Applied Financial Economics, 1999, vol. 9, issue 6, 593-604

Abstract: This paper examines the intraday behaviour of five-minute FTSE-100, Short Sterling and Long Gilt LIFFE futures returns volatility and volume. The intraday patterns identified exhibit a U-shape, significantly affected by UK and US macroeconomic news releases. Evidence from estimation of a GMM system for volatility and volume supports a significant positive and contemporaneous correlation between volatility and volume, although lagged volume is also significant in the volatility equation. Further, there is strong evidence of bi-directional causality on the basis of Granger-causality testing. These results are found to be robust to the adjustment of volatility and volume for macroeconomic news effects, and in the case of the Granger-causality tests to a variety of temporal horizons.

Date: 1999
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Citations: View citations in EconPapers (19)

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DOI: 10.1080/096031099332041

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