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Asymmetric effect of trading volume on realized volatility

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  • Maki, Daiki

Abstract

This study examines the asymmetric effect of trading volume on realized volatility and introduces two new realized volatility models to examine this effect: one model uses asymmetric trading volume variables based on intraday returns, while the other uses asymmetric trading volume variables based on daily returns. These new variables are introduced into the heterogeneous autoregressive models with the leverage effect and realized semivariance. The in-sample estimation results show that the asymmetric trading volume variables are clearly significant. Furthermore, out-of-sample forecasting comparisons indicate that asymmetric trading volume variables increase the forecasting performance of realized volatility. These empirical analyses demonstrate that considering asymmetric trading volume in modeling and forecasting realized volatility is important. This study’s findings provide valuable information for understanding and controlling asset and market risks.

Suggested Citation

  • Maki, Daiki, 2024. "Asymmetric effect of trading volume on realized volatility," International Review of Economics & Finance, Elsevier, vol. 94(C).
    • Handle: RePEc:eee:reveco:v:94:y:2024:i:c:s1059056024003800
    DOI: 10.1016/j.iref.2024.103388
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