The Impact of Trading Activity by Trader Types on Asymmetric Volatility in Nasdaq-100 Index Futures

Jullavut Kittiakaraskun, Yiuman Tse and George Wang
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Jullavut Kittiakaraskun: University of Texas at San Antonio
Yiuman Tse: University of Texas at San Antonio
George Wang: George Mason University

No 21, Working Papers from College of Business, University of Texas at San Antonio

Abstract: We test the hypothesis of Avramov, Chordia, and Goyal (2006) that asymmetric volatility is governed by the trading dynamics of informed and uninformed traders; uninformed trades increase volatility following asset price declines while informed trades decrease volatility following asset price increases. Using a dataset that directly distinguishes between informed and uninformed trades, we find that only the trading activity of small liquidity traders (i.e. retail investors) accounts for the asymmetric volatility relationship. Thus, the hypothesis of Avramov et al. is only partially supported.

Keywords: Informed and uninformed traders; asymmetric volatility; Nasdaq-100 index futures (search for similar items in EconPapers)
JEL-codes: C22 F36 G13 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2011-03-07
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