No news is not good news: evidence from the intraday return volatility-volume relationship in Shanghai Stock Exchange
This paper investigates the empirical relationship between intraday volatility and trading volume using 5-minute returns and volumes on a sample of thirty-nine stocks from the Shanghai Composite Index. The methodological approach taken is the augmented EGARCH-cum-volume model with generalized error distribution(GED) residuals. We find that the asymmetric volatility phenomenon is reversed in the Shanghai Stock Exchange. That is, volatility increases more with good news than with bad news. This evidence is inconsistent with the US markets (Wu2001, and Bae, Kim and Nelson 2007). Our results show that the persistence involatility remains even after volume is included in the model. Our results suggest volume as an information variable has a certain effect on the volatility of intraday returns. These results contradict the findings reported in the US market by other researchers. We posit that institutional factors are the major driving forces behind empirical regularities in the stock markets.
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