Open interest, volume, and volatility

Evidence from Taiwan futures markets

Meng-Feng Yen, Ming Hsiang Chen

Research output: Contribution to journalArticle

3 Citations (Scopus)

Abstract

This paper examines the relationships amongst volatility, total trading volume (TVOL) and total open interest (TOI) for three Taiwan stock index futures markets as well as the role of the latter two variables in the dynamics of GARCH modeling and forecasting. From both ex-post and ex-ante perspectives, we study this issue by using the VAR model and augmented GARCH-type models, respectively. For the GARCH-type models, we employ both symmetric and asymmetric models augmented with lagged logs in TOI and/or TVOL. We find that whether addition of these two variables helps the basic GARCH models predict future volatility depends upon the sample period examined for all three sets of futures. Nonetheless, the best three models for out-of-sample volatility forecasting in the MSE sense are generally the augmented models for all sub-intervals and all three futures contracts.

Original languageEnglish
Pages (from-to)113-141
Number of pages29
JournalJournal of Economics and Finance
Volume34
Issue number2
DOIs
Publication statusPublished - 2010 Dec 1

Fingerprint

Futures markets
Open interest
Taiwan
Generalized autoregressive conditional heteroscedasticity
Trading volume
GARCH model
Futures contracts
Volatility forecasting
GARCH modeling
Stock index
VAR model

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

Cite this

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Open interest, volume, and volatility : Evidence from Taiwan futures markets. / Yen, Meng-Feng; Chen, Ming Hsiang.

In: Journal of Economics and Finance, Vol. 34, No. 2, 01.12.2010, p. 113-141.

Research output: Contribution to journalArticle

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