Linear and Non-Linear Dependence between Returns and Trading Volume in the Currency Futures Market PDF Download
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Author: Wan Mansor Mahmood
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
In this paper, the relationship between returns and trading volume is examined for four futures contracts for the period January 1, 1986 to April 30, 1997. Both linear and nonlinear dependence are examined. The study first employs linear causality tests and find that futures returns and volume have no predictive power for one another. However, since the series show evidence of nonlinear dependence, the GARCH model is then employed. The results show a sifnificant relationship between the returns and volume for only two of the four currencies (i.e Japanese yen and Swiss franc) tested. Moveover, when the series are divided into subsamples, the results of the GARCH tests point to a significant relationship for all currency futures regarding the prediction of returns from volume traded, although mainly in the second period. The results of this study suggest that trading volume can provide importat information in return prediction using a nonlinear model but that the series do not exihibit homogenous behaviour over the entire sample period. Further, the results support the sequential information arrival hypothesis ounly in few cases.
Author: Wan Mansor Mahmood
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
In this paper, the relationship between returns and trading volume is examined for four futures contracts for the period January 1, 1986 to April 30, 1997. Both linear and nonlinear dependence are examined. The study first employs linear causality tests and find that futures returns and volume have no predictive power for one another. However, since the series show evidence of nonlinear dependence, the GARCH model is then employed. The results show a sifnificant relationship between the returns and volume for only two of the four currencies (i.e Japanese yen and Swiss franc) tested. Moveover, when the series are divided into subsamples, the results of the GARCH tests point to a significant relationship for all currency futures regarding the prediction of returns from volume traded, although mainly in the second period. The results of this study suggest that trading volume can provide importat information in return prediction using a nonlinear model but that the series do not exihibit homogenous behaviour over the entire sample period. Further, the results support the sequential information arrival hypothesis ounly in few cases.
Author: Wan Mansor Wan Mahmood
Publisher:
ISBN:
Category :
Languages : en
Pages : 650
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Book Description
Author: Wan Mansor Mahmood
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
In this paper, the issue of nonlinearity in foreign currency futures markets is examined. Daily returns are found to be linear independent but nonlinear dependent. That is, they are correlated through their second moment. However, when the BDS test is applied, the results are inconclusive as the null hypothesis of i.i.d is not rejected in some cases but rejected in others. This rejection of i.i.d in the returns and filtered returns series arises solely from the variance of the process as suggested by the third moment test. As such, GARCH(1,1) models are fitted to all the return series and the corresponding standardized residuals are tested for i.i.d behavior. It is shown that the model brings about some improvement in that nonlinear dependence in the return series is reduced considerably.
Author: Somesh K. Mathur
Publisher: Springer
ISBN: 981101759X
Category : Business & Economics
Languages : en
Pages : 426
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Book Description
This book discusses the developments in trade theories, including new-new trade models that account for firm level trade flows, trade growth accounting using inverse gravity models (including distortions in gravity models), the impact of trade liberalization under the aegis of regional and multilateral liberalization efforts of economies using partial and general equilibrium analysis, methodologies of constructing ad valorem equivalents of non-tariff barriers, volatility spillover effects of financial and exchange rate markets. The main purpose of the book is to guide researchers working in the area of international trade, especially focused on empirical analysis of trade policy issues by updating their knowledge on issues related to trade theory, empirical methods, and their applications. The book would prove useful for policy makers, academicians, and researchers.
Author: Gabriele Galati
Publisher:
ISBN:
Category : Capital market
Languages : en
Pages : 44
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Book Description
This paper provides empirical evidence on the relationship between trading volumes, volatility and bid-ask spreads in foreign exchange markets. It uses a new data set that includes daily data on trading volumes for the dollar exchange rates of seven currencies from emerging market countries. The sample period is 1 January 1998 to 30 June 1999. The results are broadly consistent with the findings of the literature that used futures volumes as proxies for total foreign exchange trading. I find that in most cases unexpected trading volumes and volatility are positively correlated, suggesting that both are driven by the arrival of public information, as predicted by the mixture of distributions hypothesis. I also find that the correlation between trading volumes and volatility is positive during "normal" periods but turns negative when volatility increases sharply. Finally, the results suggest that volatility and spreads are positively correlated, as suggested by inventory cost models. However, contrary to the prediction of these models, I do not find evidence of a significant impact of unexpected trading volumes on spreads.
Author: Ms.Laura E. Kodres
Publisher: International Monetary Fund
ISBN: 145184297X
Category : Business & Economics
Languages : en
Pages : 40
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Book Description
Recent interest in futures contracts on emerging market currencies has raised concerns among some central bank authorities about their ability to maintain stable currencies. This paper presents empirical results examining the influence of the Mexican peso, the Brazilian real, and the Hungarian forint futures contracts on the respective spot markets. While measures of linear dependence and feedback indicate strong connections between the respective markets, futures volatility does not significantly explain spot market volatility, nor does it increase after futures introductions. To account for the characteristics of the spot and futures returns a SWARCH model has been employed to estimate volatility.
Author: Mr.Charles Frederick Kramer
Publisher: International Monetary Fund
ISBN: 1451854870
Category : Business & Economics
Languages : en
Pages : 36
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Book Description
The relationship of stock returns and trading volume is the focus of much recent interest. I examine an economic model of a rational trader who operates in a market with transactions costs and noise trading. The level of trading affects the rational trader’s marginal cost of transacting; as a result, trading volume is a source of risk. This engenders an equilibrium relationship between returns and volume. The model also provides a simple way to scrutinize this relationship empirically. Empirical evidence supports the implications of the model.
Author:
Publisher:
ISBN:
Category : Economics
Languages : en
Pages : 396
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Book Description
Author: Laura E. Kodres
Publisher:
ISBN:
Category : Foreign exchange futures
Languages : en
Pages : 44
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Book Description
Author: Francisco J. Climent
Publisher:
ISBN:
Category :
Languages : en
Pages : 35
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Book Description
The recent crises of the nineties have made it clear that the links between exchange rates and stock market prices are relevant factors in the transmission of the crises. Using daily exchange rates and stock index prices of the last decade (1990-1999) the interactions between the stock market and exchange rates returns of twenty-three countries of two different geographical areas (Asia and Europe) are analysed. Our results suggest that: (i) short term relationships seem to be more relevant than long term ones, (ii) it is more relevant the presence of linear and nonlinear causality in the Asian countries, and (iii) the periods of crisis affect asymmetrically the relationship between exchange rates and stock market prices.
