Discussion Paper

No. 2018-68 | September 20, 2018
Difference in the intraday return-volume relationships of spots and futures: a quantile regression approach

Abstract

This study examines the difference in the intraday return-volume relationships of spot and index futures. Quantile regression analyses show that the widening effect of the stock trading volume on the distribution of spot returns disappears within a short period of time, whereas that of the futures trading volume remains over the long term. The short-term effect of the stock volume and the long-term effect of the futures volume are both consistent for contemporaneous trading volumes. Furthermore, the futures volume has a significantly positive effect on the option-implied volatility, whereas the stock volume is only associated with the implied volatility of at-the-money options, which can be traded quickly. In contrast, the implied volatility of out-of-the-money options, which are highly speculative, is strongly related to the futures volume. The findings suggest that the stock volume is mainly induced by hedging demand or disagreements of opinion, whereas the futures volume contains information about price movements.

JEL Classification:

C22, G12, G14

Assessment

  • Downloads: 83

Links

Cite As

Jaeram Lee, Geul Lee, and Doojin Ryu (2018). Difference in the intraday return-volume relationships of spots and futures: a quantile regression approach. Economics Discussion Papers, No 2018-68, Kiel Institute for the World Economy. http://www.economics-ejournal.org/economics/discussionpapers/2018-68


Comments and Questions


Dohyun Chun - Finance
October 16, 2018 - 09:36

This paper focuses on the return-volume relationship, using quantile regression. The quantile regression is a useful method which considers tail properties, however, not be generally utilized in the field of finance. Consequently, this paper contains interesting and distinct results that can be extended after in this field.