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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
Stable URL: http://www.jstor.org/stable/2353022
Page Count: 12
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Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
Futures Price Variability: A Test of Maturity and Volume Effects
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Abstract

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.

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