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The Impact of Trading Activity by Trader Types on Asymmetric Volatility in Nasdaq-100 Index Futures

Author

Listed:
  • Jullavut Kittiakaraskun

    (University of Texas at San Antonio)

  • Yiuman Tse

    (University of Texas at San Antonio)

  • George H.K. Wang

    (George Mason University)

Abstract
We test the hypothesis of Avramov, Chordia, and Goyal (2006) that asymmetric volatility is governed by the trading dynamics of informed and uninformed traders; uninformed trades increase volatility following asset price declines while informed trades decrease volatility following asset price increases. Using a dataset that directly distinguishes between informed and uninformed trades, we find that only the trading activity of small liquidity traders (i.e. retail investors) accounts for the asymmetric volatility relationship. Thus, the hypothesis of Avramov et al. is only partially supported.

Suggested Citation

  • Jullavut Kittiakaraskun & Yiuman Tse & George H.K. Wang, 2011. "The Impact of Trading Activity by Trader Types on Asymmetric Volatility in Nasdaq-100 Index Futures," Working Papers 0021, College of Business, University of Texas at San Antonio.
    • Handle: RePEc:tsa:wpaper:0054fin
    as

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    File URL: http://interim.business.utsa.edu/wps/fin/0021FIN-257-2010.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Informed and uninformed traders; asymmetric volatility; Nasdaq-100 index futures;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing

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