Volume and Volatility in Foreign Currency Futures Markets

Ramaprasad Bhar and Anastasios Malliaris

Chapter 5 in The World Scientific Handbook of Futures Markets, 2015, pp 103-123 from World Scientific Publishing Co. Pte. Ltd.

Abstract: In this chapter, we propose and test several hypotheses concerning time series properties of trading volume, price, short, and long-term relationships between price and volume and the determinants of trading volume in foreign currency futures. The nearby contracts for British Pound, Canadian Dollar, Japanese Yen, German Mark, and Swiss Franc are analyzed in three frequencies i.e., daily, weekly, and monthly.We find supportive evidence for all the five currencies that the price volatility is a determinant of the trading volume changes. Furthermore, the volatility of the price process is a determinant of the unexpected component of the changes in trading volume. Also, there is a significant relationship between the volatility of price and the volatility of trading volume changes for three of the five currencies in the daily frequency and for one currency in the monthly frequency.

Keywords: Futures Markets; Pricing; Risk Management; Futures Trading; Stock Indexes; Interest Rates; Futures Prices; Portfolio Theory; Hedge Funds; Foreign Exchange (search for similar items in EconPapers)
Date: 2015
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Journal Article: Volume and Volatility in Foreign Currency Futures Markets (1998)
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