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Futures Price Variability: A Test of Maturity and Volume Effects
Theoharry Grammatikos and Anthony Saunders
The Journal of Business
Vol. 59, No. 2, Part 1 (Apr., 1986), pp. 319-330
Published by: The University of Chicago Press
Stable URL: http://www.jstor.org/stable/2353022
Page Count: 12
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This study uses contract disaggregated data on futures prices to obtain evidence on the relation between price variability and volume of trading. Strong positive contemporaneous correlations between trading volume and price volatility are documented consistent with the mixture of distributions hypothesis. It is concluded that maturity is not a suitable surrogate for the common directing variable. Specifically, while maturity has a strong effect on volume, no such relation is found for price variability. Finally, while in the majority of cases price variability and trading volume are contemporaneously correlated, there are a significant number of cases in which a sequential relation appears to be present.
The Journal of Business © 1986 The University of Chicago Press