The Sources of Variance in the Helsinki Stock Exchange
We investigate the relationship between the fundamental and the transitory variance. We study how the transitory variance deviates from the fundamental variance. We use the Gonzalo and Granger (1995) permanent-temporary approach to decompose the variance common factor into a transitory and a permane...
Saved in:
| Main Author: | |
|---|---|
| Format: | conferenceObject |
| Published: |
2017
|
| Online Access: | http://hdl.handle.net/10725/5945 http://libraries.lau.edu.lb/research/laur/terms-of-use/articles.php http://www.efmaefm.org/0EFMSYMPOSIUM/2006/papers/128-EFM06%20-%20BenSitaBernard%20-Volatility_TradingIntensity.pdf |
| Tags: |
Add Tag
No Tags, Be the first to tag this record!
|
| Summary: | We investigate the relationship between the fundamental and the transitory variance. We study how the transitory variance deviates from the fundamental variance. We use the Gonzalo and Granger (1995) permanent-temporary approach to decompose the variance common factor into a transitory and a permanent component. We find that the midquote returns variance contributes by about 64 % of the common variance factor against 36 % by the trade returns variance. Furthermore, inserting the ratio of volume expectation to duration expectation in the ARMA model and the vector error correction (VEC) model, we find that the short-term variance increases (decreases) when more (less) than 1 unit share is traded for 1 unit time. |
|---|