Volatility, global information, and market conditions: a study in futures markets

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Journal of Futures Markets, ISSN: 0270-7314, Vol: 21, Issue: 2, Page: 173-196

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https://digital.usfsp.edu/fac_publications/976; https://works.bepress.com/gary-patterson/32; https://login.ezproxy.lib.usf.edu/login?url=http://onlinelibrary.wiley.com/doi/10.1002/1096-9934(200102)21:2%3C173::AID-FUT4%3E3.0.CO;2-C/pdf
10.1002/1096-9934(200102)21:2<173::aid-fut4>3.0.co;2-c; 10.1002/1096-9934(200102)21:2&lt;173::aid-fut4&gt;3.0.co;2-c
Fung, Hung-Gay; Patterson, Gary A.
Wiley-Blackwell; Wiley; John Wiley & Sons, Inc.; Digital USFSP
Business, Management and Accounting; Economics, Econometrics and Finance; Futures; Finance; Futures; Finance; Business
article description
This study examined the behavior of return volatility in relation to the timing of information flow under different market conditions influenced by trading volume and market depth. We emphasized information flow during trading and nontrading periods that may represent domestic and offshore information in the global trading of currencies. Test results show that volatility was negatively related to market depth; that is, deeper markets had relatively less return volatility. Additionally, the effect that market depth had on volatility was superseded by information within trading volume. Test results focusing on the timing of information flow reveal that in low-volume markets, the volatility of nontrading-period returns exceeded the volatility of trading-period returns. However, when trading volume was high, this pattern was reversed and conformed to the observations of earlier articles. Our findings proved to be robust across time, different currency markets, and different measures of return volatility. We also observed a trend toward greater integration between foreign and U.S. financial markets; the U.S. market increasingly emphasized information from nontrading periods to supplement information arriving during trading periods. © 2001 John Wiley & Sons, Inc. Jrl Fut Mark 21:173-196, 2001.