Trading Activity, Realized Volatility and Jumps

P. Giot, S.F.J.A. Laurent, M Petitjean

Research output: Contribution to journalArticleAcademicpeer-review

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. 

Original languageEnglish
Pages (from-to)168-175
Number of pages8
JournalJournal of Empirical Finance
Volume17
Issue number1
DOIs
Publication statusPublished - 1 Jan 2010

Keywords

  • Volume
  • Volatility
  • Transactions
  • Jumps
  • Bi-power variation
  • VOLUME
  • MARKET
  • STOCK

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