Volume and Volatility: a Case of Ise-30 Index Futures

Abstract

The objective of this paper is to examine the volume-volatility relationship (dynamic and casual) for the ISE-30 index futures using daily data for the period 2006-2008. We fundamentally conduct the empirical analyses by employing GARCH, Exponential GARCH (EGARCH) and VAR approaches. The results indicate that trading volume as a proxy of information arrivals slightly reduces the persistence of the conditional variance and has a negative impact on volatility, challenging the presence of "Mixed Distribution Hypothesis" in Turkish Derivatives Exchange. However, our findings are strongly consistent with the "Sequential Information Arrival Hypothesis" where trading volume and return volatility follow a lead-lag pattern. It is expected that the implications of the study will be useful for hedgers and speculators dealing with Turkish stock index futures. © EuroJournals Publishing, Inc. 2009.