Volatility-volume co-movements: evidence from China metal markets

Zhang, Ren and Polanski, Arnold (2016) Volatility-volume co-movements: evidence from China metal markets. Applied Economics, 48 (45). pp. 4312-4336. ISSN 0003-6846

[img] Microsoft Word (Volume-volatility comovements for AE) - Submitted Version
Download (560kB)

    Abstract

    This paper investigates the interactional relationship between price volatility and futures trading activity for three heavily traded metal products on the Shanghai Metal Exchange and the Shanghai Futures Exchange. Using models based on vector autoregression and generalized method of moments we show, in particular, that futures trading activity has a strong impact on both spot and futures price volatility in copper and aluminium markets. Futures trading activity leads spot market volatility in copper and aluminium markets which suggests that futures markets have a destabilizing effect. In order to disentangle the effect of different traders’ types on asset price movements, we decompose futures trading into speculators’ and hedgers’ trading and investigate their contributions to volatility. As a robustness check, we investigate the impact of endogenous structural breaks on the interactional relationship between price volatility and futures trading.

    Item Type: Article
    Uncontrolled Keywords: futures and spot markets,price volume volatility,contemporaneous interdependence,structural change
    Faculty \ School: Faculty of Social Sciences > School of Economics
    Depositing User: Pure Connector
    Date Deposited: 22 Mar 2016 09:28
    Last Modified: 18 Nov 2018 00:48
    URI: https://ueaeprints.uea.ac.uk/id/eprint/57782
    DOI: 10.1080/00036846.2016.1156235

    Actions (login required)

    View Item