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Trading activity, realized volatility and jumps

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  • GIOT, Pierre
  • LAURENT, Sébastien
  • PETITJEAN, Mikael

Abstract

This paper takes a new look at the relation between volume and realized volatility. In contrast to prior studies, we decompose realized volatility into two major components: a continuously varying component and a discontinuous jump component. Our results confirm that the number of trades is the dominant factor shaping the volume-volatility relation, whatever the volatility component considered. However, we also show that the decomposition of realized volatility bears on the volume-volatility relation. Trade variables are positively related to the continuous component only. The well-documented positive volume-volatility relation does not hold for jumps.
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Suggested Citation

  • GIOT, Pierre & LAURENT, Sébastien & PETITJEAN, Mikael, 2010. "Trading activity, realized volatility and jumps," LIDAM Reprints CORE 2223, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    • Handle: RePEc:cor:louvrp:2223
    DOI: 10.1016/j.jempfin.2009.07.001
    Note: In : Journal of Empirical Finance, 17(1), 168-175, 2010
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    References listed on IDEAS

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    1. Chan, Kalok & Fong, Wai-Ming, 2000. "Trade size, order imbalance, and the volatility-volume relation," Journal of Financial Economics, Elsevier, vol. 57(2), pages 247-273, August.
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