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|Title:||Realized volatility and transactions||Authors:||Chan, C.C.
Average trade size and order imbalance
Number of trades
|Issue Date:||2006||Citation:||Chan, C.C., Fong, W.M. (2006). Realized volatility and transactions. Journal of Banking and Finance 30 (7) : 2063-2085. ScholarBank@NUS Repository. https://doi.org/10.1016/j.jbankfin.2005.05.021||Abstract:||This paper re-examines the impact of number of trades, trade size and order imbalance on daily stock returns volatility. In contrast to prior studies, we estimate daily volatility using realized volatility obtained by summing up intraday squared returns. Consistent with the theory of quadratic variation, realized volatility estimates are shown to be less noisy than standard volatility measures such as absolute returns used in previous studies. In general, our results confirm [Jones, C.M., Kaul, G., Lipson, M.L., 1994. Transactions, volume, and volatility. Review of Financial Studies 7, 631-651] that number of trades is the dominant factor behind the volume-volatility relation. Neither trade size nor order imbalance adds significantly more explanatory power to realized volatility beyond number of trades. This finding is robust to different time periods, firm sizes and regression specifications. The implications of our results for microstructure theory are discussed. © 2005 Elsevier B.V. All rights reserved.||Source Title:||Journal of Banking and Finance||URI:||http://scholarbank.nus.edu.sg/handle/10635/44474||ISSN:||03784266||DOI:||10.1016/j.jbankfin.2005.05.021|
|Appears in Collections:||Staff Publications|
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