Order flow and volatility: An empirical investigation

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  • Anne Opschoor, Tinbergen Institute, Holland
  • Nick Taylor, University of Bristol, Ukendt
  • Michel van der Wel
  • Dick van Dijk, Erasmus University Rotterdam, Holland

We study the relationship between order flow and volatility. To this end we develop a comprehensive framework that simultaneously controls for the effects of macro announcements and order flow on prices and the effect of macro announcements on volatility. Using high-frequency 30-year U.S. Treasury bond futures data, we find a statistically and economically significant relationship between the absolute value of order flow and volatility. Moreover, this relationship is robust, inter alia, to a number of factors including the introduction of liquidity effects, use of data measured over a different frequency, and market conditions.

OriginalsprogEngelsk
TidsskriftJournal of Empirical Finance
Vol/bind28
Sider (fra-til)185-201
Antal sider17
ISSN0927-5398
DOI
StatusUdgivet - 1 jan. 2014

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