Abstract
This paper examines the effect of order imbalance on realized volatility in the Australian stock market for the period between August 2007 and May 2016. To analyse this asymmetric relationship, we decompose order imbalance into buyer- and seller-initiated trades and capture good and bad volatilities by using realized semivariances. We find that the effect of seller-/buyer-initiated trade on bad/good volatility is asymmetric. Specifically, the effect of seller-initiated trade on bad volatility is consistently larger than that of buyer-initiated trade on good volatility. On the other hand, while seller-initiated trade has no significant effect on good volatility, buyer-initiated trade has significantly reduced the bad volatility. We conclude that the number of trades and trade volume have an impact on realized volatility, irrespective of the components of realized volatility.
| Original language | English |
|---|---|
| Pages (from-to) | 309-320 |
| Number of pages | 12 |
| Journal | International Review of Economics and Finance |
| Volume | 62 |
| DOIs | |
| Publication status | Published - 1 Jul 2019 |
Keywords
- ASX50
- Buyer-versus seller-initiated trades
- Order imbalance
- Realized semivariances
- Realized volatility
Cite this
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Asymmetric relationship between order imbalance and realized volatility : evidence from the Australian market. / Bissoondoyal-Bheenick, Emawtee; Brooks, Robert; Do, Hung Xuan.
In: International Review of Economics and Finance, Vol. 62, 01.07.2019, p. 309-320.Research output: Contribution to journal › Article › Research › peer-review
TY - JOUR
T1 - Asymmetric relationship between order imbalance and realized volatility
T2 - evidence from the Australian market
AU - Bissoondoyal-Bheenick, Emawtee
AU - Brooks, Robert
AU - Do, Hung Xuan
PY - 2019/7/1
Y1 - 2019/7/1
N2 - This paper examines the effect of order imbalance on realized volatility in the Australian stock market for the period between August 2007 and May 2016. To analyse this asymmetric relationship, we decompose order imbalance into buyer- and seller-initiated trades and capture good and bad volatilities by using realized semivariances. We find that the effect of seller-/buyer-initiated trade on bad/good volatility is asymmetric. Specifically, the effect of seller-initiated trade on bad volatility is consistently larger than that of buyer-initiated trade on good volatility. On the other hand, while seller-initiated trade has no significant effect on good volatility, buyer-initiated trade has significantly reduced the bad volatility. We conclude that the number of trades and trade volume have an impact on realized volatility, irrespective of the components of realized volatility.
AB - This paper examines the effect of order imbalance on realized volatility in the Australian stock market for the period between August 2007 and May 2016. To analyse this asymmetric relationship, we decompose order imbalance into buyer- and seller-initiated trades and capture good and bad volatilities by using realized semivariances. We find that the effect of seller-/buyer-initiated trade on bad/good volatility is asymmetric. Specifically, the effect of seller-initiated trade on bad volatility is consistently larger than that of buyer-initiated trade on good volatility. On the other hand, while seller-initiated trade has no significant effect on good volatility, buyer-initiated trade has significantly reduced the bad volatility. We conclude that the number of trades and trade volume have an impact on realized volatility, irrespective of the components of realized volatility.
KW - ASX50
KW - Buyer-versus seller-initiated trades
KW - Order imbalance
KW - Realized semivariances
KW - Realized volatility
UR - http://www.scopus.com/inward/record.url?scp=85064646763&partnerID=8YFLogxK
U2 - 10.1016/j.iref.2019.04.009
DO - 10.1016/j.iref.2019.04.009
M3 - Article
AN - SCOPUS:85064646763
VL - 62
SP - 309
EP - 320
JO - International Review of Economics and Finance
JF - International Review of Economics and Finance
SN - 1059-0560
ER -