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Price volatility, trading volume, and market depth: evidence from the Japanese stock index futures market

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  • Toshiaki Watanabe

Abstract

This article examines the relation between price volatility, trading volume and open interest for the Nikkei 225 stock index futures traded on the Osaka Securities Exchange (OSE) using the method developed by Bessembinder and Seguin (1993). The OSE regulation for trading of the Nikkei 225 futures decreased beginning 14 February 1994. Results for the period beginning 14 February 1994 confirm the findings by Bessembinder and Seguin (1993) of a significant positive relation between volatility and unexpected volume and a significant negative relation between volatility and expected open interest. However, no relation between price volatility, volume and open interest is found for the period prior to 14 February 1994, when the regulation increased gradually. This result provides evidence that the relation between price volatility, volume and open interest may vary with the regulation.

Suggested Citation

  • Toshiaki Watanabe, 2001. "Price volatility, trading volume, and market depth: evidence from the Japanese stock index futures market," Applied Financial Economics, Taylor & Francis Journals, vol. 11(6), pages 651-658.
    • Handle: RePEc:taf:apfiec:v:11:y:2001:i:6:p:651-658
    DOI: 10.1080/096031001753266939
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    Cited by:

    1. Christos Floros, 2007. "Price and Open Interest in Greek Stock Index Futures Market," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 6(2), pages 191-202, May.
    2. Cebiroglu, Gökhan & Hautsch, Nikolaus & Horst, Ulrich, 2014. "Order exposure and liquidity coordination: Does hidden liquidity harm price efficiency?," CFS Working Paper Series 468, Center for Financial Studies (CFS).
    3. Lee, Chyi Lin & Stevenson, Simon & Cho, Hyunbum, 2022. "Listed real estate futures trading, market efficiency, and direct real estate linkages: International evidence," Journal of International Money and Finance, Elsevier, vol. 127(C).
    4. Robert Daigler, 2007. "Spread volume for currency futures," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 31(1), pages 12-19, March.
    5. Elena Valentina Ţilică & Victor Dragotă & Camelia Delcea & Răzvan Ioan Tătaru, 2024. "Portfolio management under capital market frictions: a grey clustering approach," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 10(1), pages 1-36, December.
    6. Dinh, Minh Thi Hong, 2018. "The relationship between volume imbalance and spread," Research in International Business and Finance, Elsevier, vol. 44(C), pages 76-87.
    7. Anirut Pisedtasalasai & Abeyratna Gunasekarage, 2007. "Causal and Dynamic Relationships among Stock Returns, Return Volatility and Trading Volume: Evidence from Emerging markets in South-East Asia," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 14(4), pages 277-297, December.
    8. Karan Bhanot & Donald Lien & Margot Quijano, 2008. "Will Pulling Out the Rug Help? Uncertainty about Fannie and Freddie’s Federal Guarantee and the Cost of the Subsidy," Working Papers 0035, College of Business, University of Texas at San Antonio.
    9. Stéphane Yen & Ming-Hsiang Chen, 2010. "Open interest, volume, and volatility: evidence from Taiwan futures markets," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 34(2), pages 113-141, April.
    10. Antonakakis, Nikolaos & Floros, Christos & Kizys, Renatas, 2016. "Dynamic spillover effects in futures markets: UK and US evidence," International Review of Financial Analysis, Elsevier, vol. 48(C), pages 406-418.
    11. Walid M.A. Ahmed, 2016. "Cross-border equity flows and market volatility: the case of Qatar Exchange," International Journal of Emerging Markets, Emerald Group Publishing Limited, vol. 11(3), pages 395-418, July.
    12. Kapil Gupta & Balwinder Singh, 2009. "Information Memory and Pricing Efficiency of Futures Contracts," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 8(2), pages 191-250, May.
    13. Sania Wadud & Robert D. Durand & Marc Gronwald, 2021. "Connectedness between the Crude Oil Futures and Equity Markets during the Pre- and Post-Financialisation Eras," CESifo Working Paper Series 9202, CESifo.
    14. Souček, Michael, 2013. "Crude oil, equity and gold futures open interest co-movements," Energy Economics, Elsevier, vol. 40(C), pages 306-315.
    15. Xiu Wei Yeap & Hooi Hooi Lean, 2022. "Trading Activities and the Volatility of Return on Malaysian Crude Palm Oil Futures," JRFM, MDPI, vol. 15(1), pages 1-15, January.
    16. An-Sing Chen & Hui-Jyuan Gao & Mark Leung, 2008. "Is Trading Imbalance a Better Explanatory Factor in the Volatility Process? Intraday and Daily Evidence from E-mini S&P 500 Index Futures and Information-Based Hypotheses," Working Papers 0039, College of Business, University of Texas at San Antonio.
    17. Chyi Lee & Simon Stevenson & Ming-Long Lee, 2014. "Futures Trading, Spot Price Volatility and Market Efficiency: Evidence from European Real Estate Securities Futures," The Journal of Real Estate Finance and Economics, Springer, vol. 48(2), pages 299-322, February.
    18. Hisashi Tanizaki & Shigeyuki Hamori, 2009. "Volatility transmission between Japan, UK and USA in daily stock returns," Empirical Economics, Springer, vol. 36(1), pages 27-54, February.
    19. Antonakakis, Nikolaos & Kizys, Renatas & Floros, Christos, 2014. "Dynamic Spillover Effects in Futures Markets," MPRA Paper 53876, University Library of Munich, Germany.
    20. Alexandridis, G. & Sahoo, S. & Visvikis, I., 2017. "Economic information transmissions and liquidity between shipping markets: New evidence from freight derivatives," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 98(C), pages 82-104.
    21. Ashish Kumar, 2015. "Impact of Currency Futures on Volatility in Exchange Rate," Paradigm, , vol. 19(1), pages 95-108, June.
    22. Antonio Zoratto Sanvicente, 2015. "The Price-Trading Volume Relationship in the Brazilian Stock Market, the Impact of Stock Lending and a Role for Technical Analysis," Brazilian Review of Finance, Brazilian Society of Finance, vol. 13(4), pages 631-649.

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